12 pricing strategies. 12 months. It’s not a coincidence. Make this your most profitable year by putting at least one bar and restaurant pricing strategy into play each month.
Optimize Your Menu
Your menu has the potential to be a marketing tool that upsells without saying a word – if you know how to design it right. A few simple tweaks can do wonders for your bar and restaurant pricing strategy.
Strategy #1: Put Your Best Font Forward
Who knew typing up your menu involves a critical bar and restaurant pricing strategy? Fonts matter.
According to research, the typeface you use on your menu could play a major role in how your dishes are perceived. For example, customers tend to correlate rounder typefaces to sweeter flavors. What font are you using on your dessert menu?
Another study revealed that italic type is associated with quality. Use italics for higher priced items to emphasize that the cost is worth it for greater quality.
Strategy #2: Get Descriptive
When it comes to bar and restaurant pricing strategy, it’s good to be wordy.
Research has found that vivid dish descriptions could increase sales up to 27%. Paint a picture of each menu item by using adjectives that convey flavor and quality. Include if the ingredients are locally sourced or organic, how they’re prepared or what inspired the dish.
Strategy #3: The Price is Right
If you sell a flatbread pizza for nine dollars…how do you write it out on your menu? $9.00?
It should simply be 9.
This is a top-secret bar and restaurant pricing strategy…A study by Cornell University suggests that when you remove the dollar sign, guests “forget” about the price and spend more. The research also recommends removing the zeroes. The zeroes are subconsciously read as dollar amounts: $900 for a pizza? Nope.
Calculate Your Food Costs
The golden rule of bar and restaurant pricing strategy is profitability. So, break out the calculator and apply these 3 formulas to your menu prices.
Strategy #4: Food Cost Formula
A profitable bar and restaurant pricing strategy is one that aims for 28 to 35 percent gross income on food sales. To do this, figure out your food cost. Here’s another simplified variation: Add up the ingredient costs per dish then divide it by 0.35. This is the minimum amount you can charge to make a 35% gross income on the dish. To see this bar and restaurant pricing strategy in action, here’s an example:
Hamburger ingredients cost: $3.25 / .35 = $9.28
So, you should charge at least $9.28 for that hamburger. Better yet, round up to the nearest whole dollar amount to boost your profit margin. Or, make the burger $9.95 or $9.99. Why? Because studies show the bar and restaurant pricing strategy of knocking cents off, shows “value” to customers and can increase sales.
Strategy #5: Cost-Plus Pricing
Cost-plus pricing is another popular bar and restaurant pricing strategy. It’s different from the basic food cost formula in that it factors overhead costs and profit margins.
First, add in overhead costs – like rent, utilities, and labor – to the ingredients cost above.
Then, analyze your margin. In the example above, the margin is 65%. Is that enough for you? If not, adjust your bar and restaurant pricing strategy.
Strategy #6: Remember Portion Control
Proper portions play a major role in bar and restaurant pricing strategy. Be sure to measure and weigh every ingredient when determining your menu prices. Train your staff to follow each recipe precisely.
Also consider incorporating different portions of the same dish on your menu. Charge a slightly larger percentage for smaller sizes, like 75% of the cost of a full-size entree for a half portion.
Know Your Market
Where cost-plus and food cost pricing fall short is in considering the competition – and what prices your customers find acceptable. To see a smart way to factor in those variables, use the calculations found in this Little Black Book of Pricing Secrets for Bars and Restaurants.
Strategy #7: Determine Your Demographic
Analyzing your target market can inform your bar and restaurant pricing strategy. Start with your concept. Are you a sports bar that mainly attracts blue collar workers and retirees? You can’t charge fine dining prices, but you can still remain competitive by using the food cost and cost-plus price models.
Strategy #8: Research the Competition
Knowing how much your competition is charging for similar dishes can help you develop the best bar and restaurant pricing strategy. Visit a few restaurants in the area with a similar concept to your own. Then, average out the cost of each menu item. Your pricing should fall somewhere in the middle.
Strategy #9: Prepare for Market Fluctuations
One constant in the restaurant industry? Food costs never stay the same. Your bar and restaurant pricing strategy should adjust accordingly…
Due to natural disasters, poor crop growth, or a “glut” in production, food costs fluctuate month to month. This is a major opportunity to gain a competitive advantage.
Put this on your bar and restaurant pricing strategy to-do list: At least once a month, check in on the latest commodities markets for meat, eggs, dairy, and produce.
For example, if you had the trendy avocado toast on your menu last year, you likely didn’t see a great margin. Avocado costs went soaring due to low output and high consumer demand.
If you watch commodities markets, you can spot these trends and adjust your menu. If you see poultry costs are predicted to drop, add more chicken dishes to your specials list. Chances are, your competition isn’t using this valuable bar and restaurant pricing strategy…
Offer Some Variety
An effective bar and restaurant pricing strategy is using the power of choice to increase sales.
Strategy #10: Allow for Customization
Here’s a smart way to utilize “choice” in your bar and restaurant pricing strategy. Make it easy – and fun – for guests to build their dream burger (or pizza, or pasta dish).
The best way to do this is by using restaurant tablets. These tablets show a digital version of your menu. In one click, guests can see all extras and add-ons for each dish – as well as pricing. They can build out the ideal dish that still fits into their budget.
Restaurant tablets also make it easy to implement changes in your bar and restaurant pricing strategy. If you see that beef prices are rising (because you followed strategy #9), you want to raise your steak prices. Skip the expense of reprinting your menus. Just make the change instantly (and for free) to your digital menu.
Strategy #11: Balance Your Menu
While giving guests options is a good thing, too many choices can paralyze them.
Avoid choice overwhelm. Apply a balanced bar and restaurant pricing strategy to your menu.
Research suggests 6 items for each menu category for quick service restaurants, and 7-10 for each category for full service. For a few of the items in each category, vary the prices using this next bar and restaurant pricing strategy…
Strategy #12: Follow the Rule of Three
Another way to encourage customers to spend more is by offering 3 versions of the same the dish.
The first option may be the most simplified version of a menu item – for example, a plain pasta dish with a house-made sauce. The better version adds extras, like locally grown spinach and mushrooms. The best version (and most expensive) could add a protein, like shrimp or chicken.
As a bar and restaurant pricing strategy, the customer is convinced they are getting a deal by going with the mid-level dish. Without the other two options, it wouldn’t have seemed as attractive. Or, they may splurge and say “what’s an extra $5?” after seeing the mid-range option.
When it comes to your bar and restaurant pricing strategy, combine the latest research with tried-and-true calculations. It’s that simple. For easy-to-use pricing formulas relied on by successful bars and restaurants, check out our free guidebook: