How do you Calculate price for a menu?

Answer 1

As a primary rule... you have to get your costs back, pay your people for their time and make money.

If it costs you 1.30 to make you imaginary hamburger after you have calculated the cost of the bun, the cost of the meat used, the cost of the pickles used, tomatos used and lettuce slathered on... You still have to pay the cook for cooking it, and the waitress for delivering it... and make money.

But to determine the cost can be difficult. A cost of a pitcher of iced tea averages about $0.06 in most of the USA based on 1/2 gallon of water (less than $0.01 but rounded UP to $0.01) and 2 tea bags at $).03 cents each) This pitcher can fill up to 8 glasses so each glass would cost only $0.008 cents. The average restaurant in Houston charges between $1.29 and $2.25 cents for Iced Tea.

The profit margin is enormus.

But that burger, which costs about $1.30 to make... usually sells for $5.99. That would mean a profit of $4.69. subtract the $0.25 for the waitress and $0.25 for the cook and you are left with $4.19 per imaginary hamburger.

The profit margin is still good, but in no way competes with the margins on iced tea!

My business Prof in college was very fond of the 165% profit idea. This idea espouses that you should charge 165% what something cost. That way you make a profit of 65% and make the money BACK for the original item. Most modern business seems to eye the 265% profit idea. What you choose should, hopefully, fall somewhere around those two ideals... Lets examine:

The hamburger that costs you $1.30 at 165% would sell for: $3.95 that is a fantastic price for a burger in Houston... sign me up! You have to sell a lot of burgers to make money however.

The same imaginary hamburger still costing $1.30 at 265% will run: $4.48 still a great deal... In the food biz, you want to round that up to the $#.99 so you make a little more and people think they still get a good deal. People will likely pay you $4.99 all day long for a decent burger. In non chain food establishments in my city (Houston) a decent burger plate runs $5.99 to $6.99, if you include the cost of the potato for the french fries! :)