Chapter 2 Menu Planning as a Control Tool
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Summary of Menu Pricing Methods
All four methods of determining the sale price are used in foodservice operations.
The method used depends on the sophistication of the operation and the skill set of
the manager or owner.
Food cost percentage is the most frequently used method. Most operators are
taught this method early in their careers and stick to it. Many operators are taught to
use 33 percent as the standard food cost percentage. Unfortunately, this does not take
into consideration what price the market will bear for an item or the varying labor,
supplies, and overhead required for different menu items. This method does not
account for things such as food waste, or what an operation may throw away. It only
considers raw food costs.
The contribution margin method assists the operator in getting closer to actual
cost and profi t requirements when considering selling price. As with the food cost
percentage method, it does not account for the total cost and profi t potential of all the
items on the menu. It simply looks at one item at a time to determine its selling price.
Also, this method can often result in operators failing to account for market value.
The prime-cost method is most frequently used by large chain restaurants and
more sophisticated operators. This method requires adequate technology and processes
to track fi nancial data and compute the menu-pricing formula. The prime-cost method
is a more complete means of determining prices. However, it does not account for the
market value of a menu item.
In the end, an operator needs to look at each menu item separately and determine
a price that seems reasonable. Applying a single pricing method or mark up to each
item to return the same profi t level may result in items being over- or underpriced
compared with the competition. For example, if the cost to produce a hamburger is
twice as much for Operator A as it is for similar operations, Operator A cannot price
the burger at twice that of the competition. Customers would not pay the higher price.
In this example, the operator’s cost is excessive. An operator can only charge the typical
market price for a hamburger.
Waste Not
Storm Water Pollution
When disposed of improperly, oil, grease, detergents, and degreasers can damage an
operation’s plumbing system and lead to costly repairs. If these materials fl ow into storm drains,
they pollute rivers and groundwater. To properly dispose of these materials, foodservice
operators should
• discard used washwater into the sewer system rather than fl oor drains
• use nontoxic cleaning products
• provide training to employees on proper spill cleanup
• cover dumpsters and waste containers to keep rainwater out
• replace or repair leaky dumpsters
• recycle oil and grease rather than pour it down the sink or fl oor drain
In some areas, local ordinances prohibit the release of waste into storm drains and health
department inspectors monitor storm water pollution. Foodservice operators can contact
their local health departments for additional resources and information on area regulations.