The right price is not "what the competition charges"
Most restaurateurs set prices by looking at the competitor across the street. This method completely ignores your own costs. A selling price must cover four things: ingredient cost, labor cost, fixed costs and profit.
The basic formula
Selling price = Ingredient cost / Target food cost %
Example: a dish costs 3.50 EUR in ingredients and your target food cost is 28%. Price = 3.50 / 0.28 = 12.50 EUR.
This formula is just the starting point. You must also consider the local market (if the calculated price is 18 EUR but nobody in your area pays more than 14 EUR for a first course, the issue is your food cost, not the formula), perceived value (premium ingredients justify higher prices; simple dishes have a psychological ceiling), and the menu mix (not every dish needs the same target — first courses 22-25%, mains 30-35%, desserts 15-20%).
Four pricing strategies
- Cost-plus pricing — Start from cost, add desired margin. Safe but not optimized.
- Value-based pricing — Price reflects perceived value, not just cost. A chef's signature dish can have 20% food cost and a price 3x the formula result.
- Competition-based pricing — Aligned with competitors. Useful for commodities (water, coffee), risky for dishes where you can differentiate.
- Bundle pricing — Tasting menus, lunch deals. Higher overall margin because the customer perceives savings.
Menu price psychology
- Round numbers: 13 EUR, not 12.90. Round prices signal quality.
- No currency symbol: Cornell University research shows removing the symbol reduces "pain of paying."
- No right-aligned price columns: customers compare instantly and pick the cheapest. Embed prices in descriptions.
- Anchor effect: the most expensive dish at the top makes everything else seem reasonable.
- Evocative descriptions: "Hand-rolled spaghetti with slow-cooked Gran Sasso lamb ragu, 6 hours" justifies 16 EUR. "Spaghetti with ragu" justifies 11 EUR. Same ingredients, different price.
When to raise prices
Review every quarter. Small, frequent increases (1 EUR per quarter) work better than one large jump. Do not raise anchor dishes (the ones customers come specifically for). Raise lower-selling items first. BiteBase automatically alerts you when a dish exceeds its food cost target and suggests the new price.
Common mistakes
- Same price for all dishes in a category — each dish has its own cost.
- Not updating prices when costs rise — a 25% increase in guanciale with no price change destroys margin.
- Competing only on price — the cheapest restaurant is often the first to close.
- Setting the price before calculating food cost.
FAQ
What is the ideal food cost target? 28-33% overall. Adjust by category: first courses 22-26%, mains 30-35%, desserts 15-22%.
Can dishes have different food cost percentages? Absolutely. What matters is that the weighted average across sales falls within target range.
How do I justify a price increase? You do not need to. Customers accept gradual, reasonable increases without complaint.