Multiplier

Multiplier is a very simple method that involves totaling the cost of the plate, and all ancillary items, and then multiplying that by 2.5, 3, 3.5 or 4. The problem with this method is it will be very inconsistent to the real dollar profit needed to be successful.

For example, a ¼ chicken plus ancillary cost is equal to $1. Multiply $1 x 3 = $3. With a $3.00 selling price you only make $2.00 over cost on that seat. You may have a $3.00 fixed cost so you lose $1.00 on that customer.
Some people use a multiplier and then add one or two dollars to the item for good measure.

Food Cost Percentage
Food cost percentage is nothing more than wanting a fixed food cost for all items. It uses the multiplier to determine what overall food cost will be

• 20% Food Cost – Multiplier is 5
• 25% Food Cost – Multiplier is 4
• 33% Food Cost – Multiplier is 3
• 50% Food Cost – Multiplier is 2

As with the multiplier system, the same problems exist. One other problem is using the same example of chicken with a multiplier of 3.

For steak with a cost of $5 x 3 = $15 selling price. Consistency in pricing is very important. Your menu should be balanced and a $12 range for entrees would not be considered well balanced.

When considering this method, remember, you take DOLLARS to the bank NOT percentages. Think through the dollar amount you charge and the volume it will generate. For example, Steaks may carry a higher food cost but typically they will deliver more gross profit dollars to the bottom line.

Competition
Gathering menus from competitors is a very popular way to price a menu. In comparison, the prices on the menu may vary greatly. The problem with this method is comparing

• Portion Size
• Quality of product
• Décor
• Service
• Overall points of difference
• Location
• Marketing
• Reputation

What the Market will Bare
What the market will bare has more to do with raising prices. Every market has a perceived idea of what each restaurant should be. We all know examples of restaurants that charge considerably more for basically the same food.
A good example is going to a baseball game and paying two or three times the normal price, because a captive audience will pay for it. The important feature to remember is to be careful and do not try to be something you’re not.

To sum up pricing, it is very important that you do not use only one of the pricing methods listed but use common sense and combine all of the pricing methods. Food cost is more directly affected by product mix than any other factor. All items must be adequately priced in order to ensure profitability.