Level 2 Chapter 2 Part 3

PRICING MENU ITEMS: FOOD COST PERCENTAGE METHOD

• Set percentage of menu price that food cost must be
• Calculate price that will provide this percentage
• Formula

oItem food cost ÷ Food cost percentage = Menu price

• Dependent on food cost and preparation

PRICING MENU ITEMS: CONTRIBUTION MARGIN METHOD

• Uses data to determine dollar amount to be added to item’s cost
• Works for à la carte items as well as grouped items
• Can determine for all menu items or each separately
• Two-step formula

o(Total nonfood cost + Target profit) ÷ Number of guests = Contribution margin

oContribution margin + Food cost = Menu price

PRICING MENU ITEMS

• Two additional pricing methods

oSet dollar amount markup

oSet percentage increase method

• Major items only

PRICING MENU ITEMS: SET DOLLAR AMOUNT MARKUP

• Adds fixed dollar amount to food cost
• Must know food cost and amount of markup
• Formula

oFood cost + Markup = Menu price

• Calculate markup

oProfit per menu item + Labor cost per menu item +
Operating cost per menu item = Markup

Multiple Choice

Menu Price is made up by:

• Food Cost + Labor Cost

• Food Cost X Percentage

• Labor Cost + Markup

• Food Cost + Markup

PRICING MENU ITEMS: SET PERCENTAGE INCREASE METHOD

• One step further than set dollar amount markup
• Calculates markup percentage in terms of food cost
• Formula

o

Food cost × Percentage = Markup

o

Markup ÷ Food cost = Percentage

PRICING THE EXTRAS

• Takes into account items customer receives on top of order
• These include salt, pepper, bread, butter, ketchup, sugar cubes
• Total cost is Q factor
• Incorporate in menu cost
• Formula

oAmount of item served over time ÷ Number of entrées served = Average portion used

oAverage portion used × Food cost of item = Q factor