Menu Planning - Finding Selling price

Beginner guide to Menu Engineering and determining the selling price

Good Evening Friends and new readers. It has been a while since my last online article and This will be my new article to connect with you again after years. Time flies, it has been more than six years that we are connected and this bond will continue. 

In Today’s Article, My topic will be- A beginner guide to Menu planning and Finding selling price which will focus on planning the Menu like a pro for beginner. Let’s start first with Menu planning, 

Menu planning

Menu, a marketing tool, in simple language is a list of food and benefits offered by an outlet. It is an important tool that stimulates the revenue and reflects the image of property. This Menu is determined/processed through the systematic process which is called Menu planning.

You may be wondering, why it is called the System or planning required? and some might think it is just a menu, nothing more, but, behind it there is a logic, menu planning is both science, art and complex task that requires several factors to be considered, let’s discuss few factors shortly :

• Guest; They are the one who will be dining with us. The menu depends on their needs and demands, their demography, socioeconomic conditions, Religious demands. Our menu is driven by people. 

• Cost of ingredients and availability of ingredients. (This will effect our pricing and item in menu)

• Theme of outlets (This influences the food items offered, see the difference between an asian outlet or an American restaurant)

• Kitchen layout and equipment (size of kitchen and availability of kitchen equipments to produce foods)

• Timing (Time to prepare food items, process infrastructure and service flow)

• Courses offered, Nutritional value offered and flexibility to food allergen. 

• Food Wastage and rechauffe (Several planners see to recahauffe food to reduce food wastage. 

Rechauffe (french term) may be new in terms for someone, but it can save both your labour and money. A second course/meal can be prepared from leftovers. For example; Leftovers roast beef can be converted into beef bourguignon or shepherd’s pie and leftover bread to bread pudding. Similarly rice to fried rice. 

Menu selling prices 

They are also called Menu pricing strategies. They cover cost of the ingredients and all overheads along with profit requirements. It is an important tool because it defines the dining experience of guest. For example, an expectation from expensive gourmet menu is different when compared to expectation from regular buffet dinners or fast food outlets. 

So basically talking about these, we have two menu pricing methods. Subjective and objective. What defines those two are subjective uses guesses and assumptions that customers will

Pay this much without considering standard recipe while objective pricing method is based on data(standard recipe) and based on data. 

Objective pricing method are off various types but today in this article, we will learn about Multiplier pricing method. 

Multiplier Pricing method: This is the easiest one, to remember and to learn and I will explain this in simple way. 

In this method, Cost of all ingredients is found through standard recipe and a multiplier is determined. Then, base selling price is found. Base selling price is the starting point in which other factors are added. It is the starting price of a dishes before adjustment of final price before including labour and overheads. 

For example, a standard recipe food costs is $7. 

To determine multiplier, just divide 1 with desired food costs percentage and multiply it by 100. 

For example, if my desired food cost percentage is 30%, my multiplier will be 3.33%, similarly if my desired food cost percentage is 40%, my multiplier will be 2.5%, similarly if my desired food cost percentage is 20%, my multiplier will be 5%

Now, base selling prices will be the outcome of standard recipe * desired multiplier. 

Base selling prices  = standard recipe cost * multiplier 

 

If the price looks fine it can be sold at this price or it can be adjusted looking at market/competitors price. 

The menu items don’t need to be sold at base selling price. labour and overheads can be added to base selling price later for more efficient and better menu price control. What i meant is the price can be adjusted accordingly after finding out base selling price giving more control in menu planning. 

The reason i say this (multiplier pricing method) will give more control is because, after final price is determined, the followup can be done through their sales, For example:

The menu items can be then, classified into four categories depending upon their performance in menu which depends upon contribution margin and menu mix percentage (percentage of sell of menu items) which is the difference between item selling price and its food cost: 

Contribution margin = item selling price - item food cost.

Menu mix percentage = how much percentage of the items were sold. It helps to determine popularity of certain food items in the menu. 

• stars(high popularity and higher margin)
• plow horses(high popularity low margin)
• puzzles(low popularity high margin)
• dogs (low popularity and low margin)

Stars: Try to increase the price by little and check, don’t let cost control ruin its quality, Focus it on menu and try to improve quality continuously.

Plow horses: This might represent great value to guest so increasing price randomly will not be a smart idea. However, Portion reduction, cost control or changing accompaniment can be done to increase revenue.

Puzzles: Highlight them in menu and push selling through servers. They can be featured as special of the day and price and can be lowered through promotions and discounts.

Dogs: Try to raise the price or lower the price to see how this will influence the sale. Remove from the menu will be our final option. 

This will be all in today’s article. I will be following up again in this topic on next article. Thank you for your time and patience.