Calculating the food cost per meal is a process that requires at most care. Charging more or charging less is a recipe for disaster.
The following guide will simplify these steps for you to ideally price the menu items.
1) Calculate the cost of each and every ingredient
Take into account even the slices of tomato that go into a dish. Special care should be taken to only include the specific amount of that particular item that goes into the dish. For example, include the price of the tomato slices used instead of adding up the price of a whole tomato.
2) Calculate the cost of items in small amounts that go into a dish
Account for even the items that are served as a side dish or go into making the dish attractive (seasonings and garnishes). Be it a squirt of ketchup, a slice of lemon or anything else.
3) Calculate the cooking cost
Calculate the monthly cooking cost by including the price of cooking oil, cooking gas, and everything else that goes into cooking.
To find the cooking cost for a single item just divide the monthly cooking cost with the total number of items served. This will roughly give you an idea about the cooking cost.
4) Calculate the transportation and handling costs
Calculate the cost of transporting and handling the items on a monthly basis. This can be achieved by adding the cost of transporting and handling the items from one place to another and the expenses of the person transporting and/or escorting the items.
To calculate the transportation cost of each item, divide the (monthly transportation and handling cost added to the expenses of the accompanying person) by the total cost of all the items added together.
5) Calculate the wastage
Calculate the amount of items that get wasted during the preparation of an item on a monthly basis. Also account for items that cannot be used because they passed the best for use date.
6) Calculate the wages paid to your staffs
Calculate the wages paid to each and every single staff of yours. Be it your master chef or the cleaning lady.
7) To price each menu item, follow the following steps
- Divide the amount obtained by adding the amount obtained from step 1,2 and 3 with the total number of dishes served (Take the average of the total number of dishes served during a particular period of time, ranging from weeks to months or even a year ).
- Add to it the handling and transportation cost of each and every item that goes into that dish.
- Add to it the wages paid to the employees divided by the total number of employees. Before adding this amount to the previous step divide it by the total sales (Take the average of the total number of sales made during a particular period of time, ranging from weeks to months or even a year).
- Add to it the extra charges like the tax paid, rent (if applicable), loss due to food theft, marketing cost, etc. Before adding this amount to the previous step divide it by the total sales (Take the average of the total number of sales made during a particular period of time, ranging from weeks to months or even a year).
- Next step that should be followed is to add how much profit you would like to reap by selling the dish and price your menu item accordingly.
8) Do market research
Visit the restaurant of your competitors and determine the cost of items that you are offering. Also, steal any idea or recipe that can improve your dishes.
Competitively price your menu items and to bring in customers into your restaurant sell the dishes at a lower price than that of your competitors for a small period of time. After the customers start to flow in, you can marginally increase the price.
After setting the menu pricing for each item, you’ll have to update the pricing due to market rate fluctuations and the price changes in the seasonally available items. This process can be completed manually or can be automated with the help of a restaurant management software. Read the guide on how to choose the right restaurant management software if you would like to automate this process.
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