Allocation of Dish Price:
The below pie chart shows you how the costs of a typical dish are alloctated (all % are approximate but this gives you an idea):
Costing Recipes:
Below are two different approaches to setting prices:
Competitive Pricing
In this instance, prices are set largely based on those charged by competitors for similar products.
Ceiling Pricing
Prices are pitched at a level that customers will be prepared to pay based on market research. The cost of material, labour and overheads is calculated and controlled in order to achieve a set target.
There are two common methods adopted for setting a selling price:
Cost Plus
This is the most common method adopted in the industry, whereby a percentage of the cost price (e.g. 65%) is added to every dish on the menu. You should think about varying this mark up however to ensure your menu offers value for money i.e. your profit on cheesy chips is much higher than on a roast dinner.
Gross Profit on Sales
This is a way of calculating selling prices as a percentage of gross profit on sales. With this method you target to make a certain percentage profit on sales revenue. Again a different percentage level can be applied to food or to wine according to the overall profit required.
Calculating Gross Profit
Sales Revenue - costs x 100 = gross profit % Revenue
Whichever method you adopt in your business to monitor your costs versus profitability, you will need to be consistent and know what your overall profit target is.
