One thing I’ll never forgive formal culinary schools for, is teaching new impressionable would-be chefs to use a budgeted cost percentage to price food menus. Chain restaurants share an equal responsibility for perpetuating this bad practice by focusing their managers on food cost percentages without letting them in on the secret that the cost percentage is a management tool, not a pricing tool.

Though most culinary programs teach many different methods for pricing food, every culinary student seems to emerge from the Culinary Institute of America or Le Cordon Bleu believing in the world of restaurants, all they have to do to be profitable is serve great food and deliver a 33% food cost, or is it 25%, or 35% or 30% or 19%?

The truth is, hitting a budgeted food cost does nothing to guarantee there will be enough money left over from the sale to pay for things like labor, rent, insurance, linens, small wares, uniforms, utilities, taxes, etc, etc, etc. Hitting that cost percentage really means nothing. Further, not hitting it only means, “I should give things a closer look.” It doesn’t mean there is a problem. On the contrary, a high food cost could mean you’ve been selling a lot of high cost items that contribute more gross profit per sale. Are you going to make more money selling 50 hamburgers priced at $6 that cost $1.50, or 50 lobsters priced at $30 that cost $15? As long as there isn’t a significant increase in the overhead of serving the lobster, gross profit dollars win every time. You don’t want to sell the item with the 25% cost and $4.50 gross profit, you want to sell the item with the 50% cost and the $15 gross profit. Rather than comparing the food costs, you should be comparing the gross profits from each item. Obviously, if you have $15 left over from the sale after paying for food (gross profit) compared to $4.50, you’re going to have a lot more money to pay your overhead and turn a profit.

If you want to create prices in your restaurant that guarantee you’ll have enough dollars left over after paying for food, you’ll need to make three important considerations:

   1. Market price point - What does your market consider a fair price for the food you are preparing, served in the atmosphere you offer?

   2. Menu item cost - I know I said you shouldn’t use cost percentages. That doesn’t mean you don’t include the cost of the food into the price. You need to keep up-to-date recipe dollar costs for every item on your menu, and use those costs to figure into your pricing.

When someone orders a sandwich that comes with fries or coleslaw whats your policy if they say:

a) I dont want either, can i get a discount?
b) Can i get a drink instead?
c)  Can I get a different side dish? (the other side costs more)
 
Just wondering what your different policies are regarding this matter.

What is the rule of thumb for happy hour pricing? For instance, if bottle domestic beer is $3.00, our happy hour price is $2.00. Is that too cheap? House liquor that is normally 4.50 is 2.25. In my mind, that is way too cheap. My former partner priced it that way but he is no longer in the picture. Someone help!

I am thinking of putting in an ATM machine in our lobby, we do a lot of weddings and golf tournaments (gambling & dice) and quite often get asked where the ATM is.

Has anyone had experience owning or having a company come in and install an ATM?