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Pricing of Menu

Setting the Preliminary Selling Price of Menu

The Preliminary Selling Price is the lowest amount of money a foodservice company should charge for a menu item to order to ensure that all expenses, including food, beverage, labor overhead, and profit, are covered. When determining the Preliminary Selling Price, numerous mathematical procedures may numerous mathematical procedures that may be used.

Preliminary Selling Price = Standard Portion Cost / Desired Cost Percentage

Desired Cost Percentage  

The Desired Cost is the percentage of the total cost that a restaurant aims to accomplish. When all requirements have been met and purchasing costs have stayed consistent, this is the best cost percentage to achieve. The Desired Cost Percentage is usually 2–4 percentage points lower than the Actual Cost Percentage. The cost % calculated by using the Cost of Sales calculation is known as the Actual Cost Percentage. The Desired Cost Percentage may be thought of as a restaurant business aim.

Pricing Factor 

The Pricing Factor is the second technique for determining the Preliminary Selling Price. To get the Pricing Factor, multiply 100 percent by the Desired Food Cost percent. 

PSP = Standard Portion Cost  X  Pricing Factor

Determining the Menu Selling Price 

The Preliminary Selling Price is calculated mathematically by the managers. The management wants to charge as much as possible so that every menu item generates the most profit for the company. Managers must choose a Menu Selling Price that generates a profit while being fair to consumers.