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It is essential to strike an appropriate balance between your food costs and their prices. Your prices need to cover your expenses to allow you to run your business comfortably and further invest in its success, but should not be so high that they drive consumers away.
The following are some proven tips to achieving the perfect synergy between the two.a
Calculate Portion Costs
The cost of each menu item is dependent upon a multitude of different factors.
The expense incurred to produce each dish includes individual ingredients, handling and storage for the ingredients, and preparation and cooking time.
Include Other Expenses
You need to consider many other expenses before settling on the final prices for your menu items—factor in overhead costs and running costs.
Don’t forget to consider rent, bills, insurance, maintenance, and payroll when deciding the overall budget for your restaurant.
Add Profit Margins
Once you thoroughly understand the costs, you can decide on a general profit margin that you want to yield on each dish. The summation of both will be the final price for each dish.
Items that require a lot of preparation and a high level of culinary expertise can be priced higher.
Competitor Pricing
It is prudent to survey how your competitors have priced similar items. This will help you gauge a reasonable range that you can use for your own menu.
You can slightly lower your prices to attract business from other vendors. Alternatively, you can invest in establishing your brand as one that focuses on quality and can charge higher prices.
Know your Consumers
At the end of the day, how successfully your menu items do depends entirely on whether the customer is willing to pay for them at the prices you have set.