9 Restaurant Menu Pricing Strategies To Maximize Restaurant Profit

9 Lesser-Known Restaurant Menu Pricing Hacks to Maximize Restaurant Profit

What are the restaurant menu pricing strategies that encourage customers to spend more? Most restaurateurs get into this dilemma while planning a menu and determining different restaurant menu pricing strategies that will entice more customers. But this is no easy task, and most restaurateurs often end up making a few menu pricing mistakes which can have a detrimental effect on business. Here we have compiled for you a list of some lesser known restaurant menu pricing strategies. Employ these and see your profits soar!

Restaurant Menu Pricing Strategies That Will Increase Your Restaurant Profits

Earlier, we had discussed how to plan and design a restaurant menu; now, we will take it to the next step and discuss some menu pricing strategies. Here we have rounded up the ‘Top 9 Formulas And Strategies’ to determine restaurant menu prices.

1. Price Your Menu According To The Type Of Restaurant

One of the most important, restaurant menu pricing strategies, before you decide the price of any dish on our restaurant menu, you must keep your restaurant format in mind. The amount you charge will include the cost of raw materials, cost of labour, costs of restaurant décor, regular maintenance costs and other such expenses. Ideally, the menu price must be the sum of your food cost, overhead cost, labour cost and projected profit for that item.

For this, you need to calculate your Gross Margin Value (GMV) which is the difference between the menu price and the food cost of a dish. The formula to calculate GMV is:

GMV= (Total Revenue- Cost of goods sold)/Revenue

Ideally, GMV should be around 60-65%. The GMV varies according to the type of restaurant that you’re running. A fine-dine restaurant has higher overhead costs as compared to a casual dining restaurant. A Quick Service Restaurant (QSR) doesn’t provide much customer service or infrastructure; hence, the GMV is set relatively lower than fine dining restaurants. The GMV of varied types of restaurants are as follows:

Fine dining: 75%

Casual dining: 55%

Quick service restaurant (QSR): 45%

You can not determine your dish price based on one strategy alone, but all your restaurant menu pricing strategies should target these numbers.

2. Charge More For Exotic Cuisine

restaurant Menu pricing strategies-charge a premium price for exotic cuisine

The type of cuisine that you offer plays an essential role in deciding the restaurant menu pricing strategy. If your restaurant serves gourmet Italian food then, you can tag premium price rates on your food items despite the cost of raw ingredients. This is where you need to play with the psyche of the customers; the premium price tag will make them feel they are treating them with fine dining experience and rich gourmet foods. The delicacy of the dish might be lost if it is priced as economically as any other local cuisine or fast food items. Therefore, don’t hesitate to charge a bit extra for an exotic dish and earn the higher rate of profits.

3. Revamp The Dishes With A Special Ingredient

The best way to optimise a restaurant menu is to play with different variations of the same dish. Add dishes that use low-priced basic ingredients except one or two exquisite ingredients to enhance the richness of the flavour and the aroma. You can sprinkle a few exotic herbs and spices to add fusion flavour twists to your existing dishes. Restaurant menu pricing strategies like this work with the intent of offering combination ingredients which lower the final making cost of the meal but still allows you to tap premium profit.

For example, you can add saffron leaves to plain biryani and charge more for providing a speciality dish, that is, Zafraani biryani.

4. Use Relative Pricing

restaurant Menu pricing strategies- relative pricing
Chilly Fries at Rs 60 seems reasonable enough compared to Cheese Fries at Rs 90

Use relative restaurant menu pricing strategies to get your customers to buy more. When you place your high-profit items next to expensive dishes, your customers are likely to order the cheaper, yet the high-profit item. For example, a salted fries tagged at 50 rupees include nominal food costs but, still are sold at a high margin. On the other hand, chilly cheese fries are labelled at 90 rupees but, does not include the same margin. Thus, placing plain fries next to chilly-cheese fries will make the customer impulsively order regular fries, and you will earn more profit.

5. Decide The Right Price For The Right Quantity

There has always been a struggle in setting the price tag right. Many restaurants make the mistake of either charging too much or too less for food. While charging too much would drive the customers away, charging too little will diminish the margin of profits. Restaurateurs should also take into account the portion sizes while pricing the restaurant menu.

Here are some menu pricing blunders which you must avoid:

  1. Charging more for a large quantity – Charging more for larger quantity might not work well, especially new customers who are not aware of the exact quantity served.
  2. Charging less for less quantity – Many restaurants charge less for less quantity to stay ahead of the competition and encourage customers to order more but, the less quantity would be a put-off.
  3. Charging more for less quantity – A lot of restaurants tend to charge more for less quantity. This pricing strategy can dishearten customers since they are getting less food compared to what they paid – eventually, they might not return to your eatery.

Here is one tip to strike a right balance between the price and the quantity and avoid above three restaurant menu pricing blunders: do not decide the price solely based on the quantity. Serve decent quantity of food and mention the number of servings alongside the price of each item to clear the confusion. At the same time, also take account of other crucial factors involved in processing and serving food.

6. Have A Chef Special In Each Section

In each section of the menu, you can have a ‘Chef’s Special’ item. Customers are always looking (and often ask too) for something exclusive when they’re ordering. A special item, especially the chef’s favourite infallibly catches their fancy. Here are three quick steps to do it:

  1. Add a few exquisite ingredients to revamp the highest profit dish
  2. Name it as the ‘Chef’s Special.’
  3. Place it at the top or within a highlighted box in each category

In this manner, you can promote such items in each category, in your restaurant menu, charge a premium price for it and make profits on the same item than earlier.

restaurant Menu pricing strategies- highlight special items

7. Avoid Putting Currency Sign Next To Item Price 

The most basic yet the most ignored restaurant menu pricing strategy is not putting the Rupee sign next to the price. Placing a Rupee sign next to the price makes customers conscious about how much they are spending when they see X ‘rupees’ on that item. This might daunt and discourage customers a bit. The currency sign marks their expenditure on the budget conscious customer’s mind – and this is what we need to minimise to coax them in ordering food without hesitating about the price. That’s why we recommend removing the currency sign unless you are expecting guests using foreign currencies. To understand the psychology behind this technique, read this.

8. Write The Price At The End Of The Menu Description

Food descriptions of the dish are a must for all menu items. Write appetising descriptions stating ingredients used in the dish to explain the delicacy of the item and build an appetite for the dish. The price stated at the end of the description might get customers craving for the item by the time they finished reading it. Customers with a craving for a particular item are likely to consider lesser about the price and more about the experience which they’d anticipate while reading the description.

9. Use Complimentary Item Pricing

restaurant Menu pricing strategies-complimentary item/combo offer promotion

You can offer discounts on complimentary items to increase the sale of related food items. For example, a customer ordering burger worth 50/70 rupees may not want fries worth of 50/60/90 rupees and a beverage. However, offering three items together as a combo pack worth rupees 130 might be a cost-effective deal for customers, and they want to order three items as a complete meal. A small discount on complimentary items will increase sales.

Do you find these tips and formulas useful? Implement these restaurant menu pricing strategies in your restaurant and let us know how it works for your business! We yearn to hear from you – drop your comments below.

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