How to price your menu

Plenty of restaurants set prices by copying the place across the street or going with what "feels right". The problem is you never know whether each dish actually makes you money. Here are the three methods most used to price a menu, when each one makes sense and how to combine them.

Before you start: you need your cost per plate

All three methods start from the same number: what it costs you to serve that dish, with every ingredient, its trim loss and its packaging if it's to go. If you don't have it yet, follow the guide on how to calculate recipe cost or use the food cost calculator.

Method 1: by food cost %

You choose what percentage of the price should go to ingredients and solve for the price.

Price = Cost per plate ÷ Target food cost

Enchiladas that cost you $3.40, with a 30% target, come out to $3.40 ÷ 0.30 = $11.33. Rounded: $11.49.

Pros: it's quick, easy to explain and keeps your food cost even.

Cons: it treats every dish the same, and they aren't. A steak plate that costs $9.00 would come out at $30.00, out of your customers' range. And an agua fresca that costs $0.40 would come out at $1.33, giving away money on something people would happily pay $3 or more for.

Method 2: by dollar margin

Instead of a percentage, you decide how many dollars each dish has to leave you after paying for its ingredients. That money is what pays rent, payroll and your profit.

Price = Cost per plate + Dollar margin

How do you know how much margin you need? A simple way:

Average margin = (Monthly costs except food + Profit you want) ÷ Plates sold per month

If your monthly costs excluding food (labor, rent, utilities, etc.) are $34,000, you want to make $6,000 and you sell about 4,000 plates, each plate has to leave you $10.00 on average.

With this method, the $9.00 steak at $22.99 leaves $13.99 even though its food cost is 39%. The enchiladas at $11.49 leave $8.09 at 30%. The steak makes more money per plate, even though its percentage looks "worse".

Pros: it focuses you on what actually pays the bills: dollars, not percentages. Cons: you need to know your expenses and how much you sell; otherwise the margin is a guess.

Method 3: by competition

You check what 3 to 5 restaurants in your area, of your type and level, charge for a similar dish, and place yourself in that range.

Pros: it tells you what your customers are used to paying. Cons: you don't know anyone else's costs. Their rent, suppliers and portions are different; copying their price can leave you working without making money. Use it to check your price, never as your only method.

How to combine all three

1. Calculate the food cost price as a starting point.
2. Check the dollar margin. Does it leave what you need? If it's an expensive dish, accept a higher percentage when the dollars work. If it's cheap (drinks, add-ons), charge what it's worth to the customer, not just its cost.
3. Compare with the market. If you land well above the range, adjust the portion or recipe before the price. If you land well below, you're probably leaving money on the table.
4. Round and check that the menu makes sense as a whole.

None of the three has the same food cost, and that's fine: what matters is that, together and with how much you sell of each, the menu brings in the money you need.

Round and arrange

• Use consistent endings across the menu (for example .49 and .99, or whole numbers). Mixing them looks messy.
• Leave room between sizes: if the small and large cost almost the same, everyone orders the large.
• Check your to-go prices: packaging is part of the cost.

How often to review prices

Every time a key ingredient goes up, and at least every three months even if nothing seems to have changed; small increases add up. If you sell on delivery apps, remember they charge a commission on every order; many restaurants raise their prices in the app to cover it.

In Kitchfly, each dish's cost updates with every purchase you log, and it tells you when one goes over your target food cost, so you know exactly which one to review. And online orders from your own page pay no commission.

Common pricing mistakes

• Copying the competition without knowing your costs.
• Using the same percentage for everything, overpricing expensive dishes and giving away drinks and add-ons.
• Costing without trim loss: the cost comes out low, and so does the price.
• Not raising prices out of fear while ingredients keep going up. A small increase on time is less noticeable than a big one late.
• Forgetting packaging on to-go orders.

Frequently asked questions