Setting up your first restaurant is fraught with problems. You have to find wholesalers, equipment, location, and staff; and then wait for the customers to roll in.

But wait, before you do all this, you’ve also got to calculate the price of a single dish. Why is this so critically important? Well, simply put, your restaurant meal prices should cover your day to day expenses and still have enough left over to cover your initial investment and make a profit.

Sounds Complicated!

Yes, it does sound complicated but its quite simple. You can do this manually by estimating the price per raw item, the price for prep time and approximate labor costs, the cook time and its costs, and clean time with labor costs. Adding these factors will give you a rough idea of just how much you have to charge per item or per dish. However, doing this manually is complicated and time-consuming. As a result, you can now find smart and simple software that will do the entire work for you. Once you have the approximate pricing, you can then compare the rates with restaurants in the area to find out whether you are roughly in the same range. Ideally, a 300% markup is common in restaurants to cover basic operating costs and to generate a profit. For high-luxury items, the markup may be as high as 500%.

Other Factors

Apart from the basic price factor, other aspects must also be considered while you fix your restaurant meal prices. One of the most important factors to consider is the price barrier. Nearly every country has a specific price barrier that will prevent customers from buying. For example, the current price barrier for middle class diners in the US is $20. Anything over this limit will create a mindset of an expensive restaurant. As a result, it does become necessary for you to judge your clientele and plan your menu according to them. If you live in an upscale area or if you cater to an upscale crowd, the price limit may go upward but there is an upper ceiling there as well. These prices will also affect your restaurant image. For example, a quick-service eatery will pull in diners who want quantity and quality at a low cost. You should also consider dish factors. For example, perishable dishes should be priced lower to encourage sales. In case you have expensive perishable items, list them in a separate menu and remove the dollar sign from the prices to encourage sales. You can also put in a buy one/get one free deal to encourage sales. You should also change your menu ingredients to suit seasonal changes. However, this does not mean adjusting the menu prices. For example, when seasonal fruits and vegetables become available, create dishes that are in the same price range but which will reflect the changing seasons.

As you can see, these are basic factors but they will influence your restaurant meal prices considerably. If you’ve done this correctly, your sales and your profit line analysis will reflect this fact.