"My business partner and I are about to open a restaurant. As newcomers to the industry we are not sure how to price the menus. If we set the pricing too low, we'll reduce our margins, and it might be hard to raise prices later without alienating customers. And if we set it too high, we'll deter potential customers from giving us a try. Are there any rules of thumb for menu pricing? And how do you know when you've got it right?"
From a marketing perspective, I would set the prices in the higher bracket for the à la carte menu. This will enable to you to adapt a kind of pricing policy that is used effectively in the low-cost airline industry, based on matching prices to demand.
The busiest times of the week for most restaurants will be 7pm to 10pm on Fridays and Saturdays. During this period, the à la carte menu should be in effect - and nothing else. For other times of the day and week, you will be able to offer more value for money.
Many restaurants can achieve excellent sales figures at traditionally slow periods by, for example, having a cheaper pre-theatre menu available from 5pm to 7pm and a post-theatre menu after 10pm. Further promotions on the same theme at the same time of 5pm to 7pm could include a senior citizens' menu or a students' menu, depending on the demographics of your area.
A specials menu can also be offered alongside the à la carte menu, with the exception of Friday and Saturday nights. Having a few other menus may seem a bit daunting, but they should be slight variations on the à la carte menu, with smaller portions.
A higher priced à la carte menu means that you can also be more flexible with giving discounts to certain groups.
For example, as part of your marketing mix, you may wish to offer a 10% discount to a local large employer, members of a local gym or staff from a local hospital. The organisations that this discount is available to will be more than happy to promote the offer and the restaurant to their staff, as it means extra value to their customers or a nice little perk for workers of a particular organisation.
Strategy Clinic III
The Caterer
August 2005
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