22 Controlling Costs in Foodservice
manufacturers and distributors offer menu ideas for the products they sell. If a sales
representative for a distributor or manufacturer shows a manager a new product, the
manager can ask for recipe and menu ideas based on the item. Sales representatives
can be challenged to provide ideas that promote an operation’s brand or message.
Pricing the Menu
Various types of menu pricing are used in the industry. Each item is listed and
assigned its own price on an à la carte menu. À la carte is a French expression meaning
“from the menu.” It is generally used in one of two ways—each menu item is priced
and ordered separately, or the customer receives a side dish at no extra charge with
each main-course item.
Table d’hôte is a French phrase that means “host’s table.” A menu using table d’hôte
pricing offers complete meals for a fi xed price. For instance, for $27, a customer receives
a complete meal, including appetizer, salad, entrée, sides, dessert, and a nonalcoholic
beverage. Often, the customer is provided a selection from each grouping, but the overall
price remains the same. Under entrée, the menu may offer a choice of fi let mignon or
Chilean sea bass.
In combination pricing, some menu items are priced à la carte, while others are
priced with a few menu items included. Appetizers, desserts, and beverages are
frequently individually priced. Entrée selections may come with preselected side
dishes, or offer several choices from a given list of sides. The customer receives the
entrée and sides for one set price.
Menu-Pricing Methods
The appropriate pricing of menu items is critical to the fi nancial success of an
operation. Selling prices must cover the expenses incurred in producing menu items.
Prices must also produce a profi t for the operation. For each menu item, the objective
is to identify the price that produces the greatest profi t without alienating the customer.
If customers perceive that prices are too high given the quality of menu items, they
will not patronize an establishment. If prices are too low, profi tability suffers.
Menu pricing is both an art and a science. Determining what the market will bear
is an art. It requires knowledge of like-items on the market offered by the competition
and how much they cost. The person pricing a menu speculates about the right price
point for his or her establishment. The science of menu pricing involves the various
pricing methods used in the industry, including
• food cost percentage (factor system)
• contribution margin
• prime cost
• Texas Restaurant Association markup
Food Cost Percentage Method
In the food cost percentage method, sometimes called the factor system, the selling
price of a menu item is based on the desired fraction of the price that the food cost
represents. For example, if a menu item’s selling price is $10 and the cost of the food
used to make it is $2, the food cost percentage is 20 percent. The desired food cost
percentage is a goal set by the manager.