A decade or so ago, restaurants could not afford to make mistakes with their menu prices. The arduous and costly task of designing and printing menus meant you needed to get your prices right the first time. Now in the era of desktop publishing, it is easier to revamp your menu, if the meal prices are not bringing in adequate menu.
However, you should be cautious about changing your prices unless it is absolutely necessary for financial survival. Regular customers will not be happy to discover their favourite dish has jumped in price each time they visit.
Another issue to consider when designing your menu is the price change of seasonal foods. Some fruits, vegetables and meats are plentiful and cheap during certain seasons but the price will increase considerably during the off-season. While you might make a healthy profit on your pomegranate lamb while both pomegranates and lamb are in season, the dish will lose money when your ingredients rise abruptly in price. The solution is to offer seasonal foods as specials, rather than eliminating your profits for long periods or constantly changing your prices.
THE LOSS-LEADER STRATEGY
A loss-leader is a strategically underpriced product which draws customers into your store, where they will look around and decide to buy more. The best-known example is McDonalds’ 30c ice-cream cone: Mum or Dad can treat a tribe of children to ice-creams for less than the price of one ice-block from the shop next door. While McDonalds may take a loss on the ice-creams, there is a strong chance they will still make a considerable profit on Mum’s coffee or soft drink. Later, the entire family will tell friends about their low-cost treat.
Make sure your loss-leader product genuinely lures customers through the door where they will be tempted to spend on other items. Loss-leaders can back-fire on you if the customer feels scammed or sees an opportunity to scam you. If you offer a two-for-one deal, don’t add expensive conditions, such as limiting the deal to the expensive end of the menu.
Complimentary desserts are a great loss-leader, but complimentary appetizers might send your potential customers’ home satisfied before they order. The loss-leader should make both you and your customer recognise a good deal.
PROVIDE VALUE FOR MONEY
Restaurant patrons want to look down at their meal and think, “Wow – I couldn’t make this at home.” You can achieve this response without resorting to extravagant or costly ingredients. Make the most of your chef’s skills and experience to provide unusual cuts of meat and succulent sauces or condiments. You can justify higher menu prices if you are offering something different or superior.
Make sure your prices are logical – one restaurant lost custom when the “banquet menu” cost more than the combined price of the individual dishes! No matter how cleverly you balance your pricing structure, your formula only works when you have customers consistently coming through the door. So don’t compromise on service or quality when calculating how to make a profit.