Menu pricing is a fragile steadiness of crunching numbers, researching the native market and diner habits, and implementing an operational plan that may make or break your restaurant’s profitability.
Hitting profitability is getting tougher as prices like hire, insurance coverage, labor, and meals rise throughout the board. The truth is, common meals prices and wages for restaurant staff have risen by 30% since 2019, in line with the Nationwide Restaurant Affiliation 2025 State of the Restaurant Trade Report. All of those points issue into the ultimate price of a dish or drink on a menu, making already tight margins even tighter. However diners are taking over rising costs to steadiness this: the report states 67% of adults stated it’s acceptable for eating places to extend costs to cowl the upper price of doing enterprise.
Begin with correct costing
Earlier than you possibly can worth strategically, you should know your true prices. Take note of what the market dictates, from how a lot company are keen to spend to potential surprising worth spikes.
“You may’t have correct menu pricing until you are doing due diligence of really costing out your product,” stated Ryan Pollnow, co-chef and culinary director at San Francisco’s Flour + Water Hospitality Group.
His restaurant group targets 24% to 26% meals price throughout all ideas. Pollnow has seen wild swings in costs prompting the addition of Craftable’s Foodager, a software program platform that tracks vendor pricing and stock in actual time.
“Three months in the past, the worth of eggs skyrocketed due to avian flu,” Pollnow stated. “We use a ton of eggs in pasta manufacturing. We had been alerted the costs had been going up and will regulate on the fly.”
Steadiness prices with perceived worth
You additionally wish to think about how prices impression your company’ total ideas on the eating expertise. Sure, you wish to make a revenue, however offering a constructive expertise that displays what folks pay for can be necessary.
“Now we have our goal price percentages, however we would like our company to really feel they’ve had a useful expertise,” stated David Schwartz, artistic director and culinary director of Toronto’s Massive Hug Hospitality, which owns Mimi Chinese language there and in Miami.
Schwartz defined generally he needs to make use of distinctive components, like a specialty melon that prices $18 per pound. However he is aware of there is not a good worth the place he’d make a revenue, and company can pay for it.
Pollnow challenges his workforce to decide on components which have a decrease price however can nonetheless really feel celebratory for diners.
“If we will have a steadiness on our menu the place there are humble components and make them the star of the present, that is one approach to preserve our costs down,” Pollnow stated.
Embrace the sliding scale
Not each dish hits the identical food-cost goal, so utilizing a sliding scale may help, as Flour + Water’s beverage director Sam Bogue does when pricing his wine checklist.
“There are few occasions anybody must be doing a flat markup on a wine checklist,” Bogue stated.
Decrease-end wines by the glass and bottle could have a better markup, whereas the bottom markup would be the highest-priced bottles. This technique rewards clients for greater spending whereas sustaining profitability on entry-level choices.
The identical precept applies to meals the place you possibly can shield your backside line with sure gadgets, whereas nonetheless offering deal for diners.
“Now we have gadgets which might be extra worthwhile for us from a share standpoint that present cushion versus others that provide extra worth for the company,” stated Kayla Morrison, vp of operations for Chicago’s Ballyhoo Hospitality. “Apps or salads are costed extra favorably [for us], and we’ll promote a steak at 40% to 45% versus 20%.”
Steadiness can even come from portion tweaks. When Ballyhoo rolled out a brief rib agnolotti at its latest idea, Jackman & Co., company felt the serving was too small. As a substitute of elevating costs, the workforce added two extra items, absorbed the fee, and happy company with out hurting margins.
Know your market’s worth tolerance
One mistake some restaurant operators make is underestimating what their market will bear. Cami Jetta, chef-owner of Brooklyn’s Dinner Occasion, discovered this the laborious manner. When she opened in 2021, she charged simply $42 for a four-course tasting menu.
“I used to be hooked up to an thought of accessibility,” Jetta stated. “However clients, particularly in a metropolis like New York, have a higher tolerance for top costs. Worth your meals what it is value from the soar.”
Dinner Occasion has since restructured to supply $65 three-course and $115 five-course choices. Whereas that authentic pricing helped construct a buzz, “it was criminally low,” Jetta admitted.
You might also wish to concentrate on pricing primarily based on precise prices quite than charging extra for one thing clients assume can be priced greater. Mimi Chinese language’s Schwartz stated he is aware of folks can pay extra for merchandise like ahi tuna, caviar, or wagyu, however doesn’t play that recreation.
“We cannot arbitrarily worth issues that manner,” he stated. “We attempt to persist with an sincere illustration of the fee going right into a dish.”
Use knowledge to drive selections
Utilizing gross sales knowledge may help constantly optimize pricing. Morrison employs what she calls a “stars and canines” evaluation, categorizing menu gadgets by profitability and recognition: stars (excessive revenue, excessive recognition), workhorses (excessive recognition, low revenue), and canines (each low).
“We use the info to assist us determine what the canines are,” Morrison stated. “Will we preserve it, change it, or eliminate it?”
This systematic strategy helps determine underperforming gadgets and pricing alternatives. Flour + Water reprints their wine checklist weekly particularly to allow common pricing changes.
“Any time we put a brand new wine or glass of wine on the checklist, there needs to be a ripple impact the place we alter the worth of every part round it,” Bogue stated.
Plus, if you happen to’re seeing one thing you’ve priced barely decrease that’s promoting rather well, it’s OK to go a bit greater.
“If we’ve got one thing that is flying out the door and it is underpriced by a share, it tells us we will increase costs,” Schwartz added.
Make drinks your revenue engine
Each operator we spoke with emphasised drinks as essential revenue drivers. Dinner Occasion will get roughly 80% revenue margins on wine and cocktails. Their Soiled Dill Martini prices about $3.50 to make (together with prices for garnishes and labor) and sells for $18. A German orange wine bottle prices the restaurant $21.33, and so they cost $22 per glass at 80% revenue.
Morrison has a easy rule for cocktail pricing at Ballyhoo.
“If you cannot give me an amazing drink that is $17 or much less, it is not happening the menu,” she stated. “I encourage bartenders that come to me with the best drink that is $24 to return and reverse engineer it to have it price much less.”
This constraint forces creativity inside worthwhile parameters, resulting in revolutionary drinks that clients love and the restaurant can promote profitably.
Constructing for long-term sustainability
In the end, it appears profitable menu pricing is not about maximizing short-term income. It is about constructing a sustainable enterprise that may climate market fluctuations whereas offering worth to each clients and workers.
“It isn’t about making a ton of cash, however guaranteeing the enterprise can survive,” Jetta stated.
The operators that thrive show to be those that view pricing as an ongoing strategic course of, utilizing knowledge and market insights to continuously refine their strategy whereas staying true to their idea and values.
