Economics
Menu Costs
Menu costs refer to the expenses incurred by firms when they change the prices of their products or services. These costs include the time and money spent on updating price lists, printing new menus, and communicating the changes to customers. Menu costs can create inefficiencies in the economy and make it more difficult for firms to adjust to changes in demand or supply.
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3 Key excerpts on "Menu Costs"
eBook - PDF- Nancy Loman Scanlon(Author)
- 2012(Publication Date)
- Wiley(Publisher)
• À la carte • Actual-cost method • Contribution-to-profit method • Factor pricing • Fixed costs • Fixed-price method • Food-and-beverage costs • Food-cost percentage method • Gross profit • Labor costs • Mixed-pricing method • Overhead costs • Package pricing • Profit • Sales mix • Semi à la carte • Table d’hôte • Variable costs Key Terms Pricing C H A P T E R S E V E N Catering-Menu Controls and What You Will Learn in This Chapter Menu pricing is an important management control that is directly related to the overall profitability of a food-service operation. Effective and accurate menu pricing requires a thorough knowledge of a food-service operation’s costs and profit goals. Successful menu pricing also requires a knowledge of what customers find acceptable and the prices charged for similar menus and packages by competitive food-service operators. This chapter reviews the formulas for calculating costs, break-even points, and profits. CaterMate software reports that reflect these activities are reviewed. Package pricing can capture revenues that might otherwise go to outside vendors. Revenue-management practices can help increase the value of individual functions by creating inclusive package prices. Costs and Profit Prior to the calculation of menu prices, it is necessary to determine how much profit a food- service operation must generate to cover operating costs. Profit is the portion of revenue that remains after all operating costs are paid. Costs are all expenses required to conduct business, including rent or mortgage, taxes, licensing fees, and such contracts as laundry, pest control, equipment service, and trash removal, plus food, labor, supplies, telephone, heat, electricity, water, advertising, and printing, to name a few. Costs are broken into three major categories: 1. Food-and-beverage costs: The cost of all food-related purchases required to produce completed menu items 2.
eBook - PDF- Lendal H. Kotschevar, Diane Withrow(Authors)
- 2007(Publication Date)
- Wiley(Publisher)
Market Research 169 Economic Influences Many methods are used to price menus. Some managers calculate their costs as a percentage of sales and then calculate the selling price. Others base selling prices on factors other than costs. Foodservice operators should be aware that laws of economics and commerce work both to the benefit and harm of businesses. The two most basic economic laws affect every operation: (1) when supply is limited, prices tend to rise, and when supply is plentiful, prices tend to drop; and (2) when demand is high, prices rise, and when demand is low, prices drop. Thus, every menu planner should try to plan menus that create high demand. Operations that can restrict supply are few, but when they can, they have a chance to charge enough to make a good profit and still hold their business. Dropping prices may create more demand, while raising them may reduce it. Some operations reduce prices and hope to increase demand and, while making a smaller profit, make it up with increased volume. Others raise prices, reducing demand but earning a greater profit. The south Florida area has a large demand for food and housing during the winter months, and many operations do well as a result. Many restaurants have waiting lines for lunch and dinner. In the summer, both tourists and residents leave, and many operations drop their prices, cut their staffs, and retrench in every way because of the lack of demand. Some even close. A smart menu planner knows that when the supply of an item is plentiful, costs will be low, and a better profit can be made. Thus, in the late spring and early summer, lamb is plentiful, relatively inexpensive, and of good quality and, therefore, is a good menu item. Turkey is plentiful in the late fall and early winter. When the smelt run is on in the Great Lakes, local foodservices offer them as all-you-can-eat menu items.
- Lea R. Dopson, David K. Hayes(Authors)
- 2016(Publication Date)
- Wiley(Publisher)
Economic conditions 2. Local competition CHAPTER OUTLINE 1 Factors Affecting Menu Pricing 2 Assigning Menu Prices 3 Menu Price Analysis 4 Apply What You Have Learned 5 Key Terms and Concepts 6 Test Your Skills Factors Affecting Menu Pricing 259 3. Service levels 4. Guest type 5. Product quality 6. Portion size 7. Ambience 8. Meal period 9. Location 10. Sales mix Economic Conditions The economic conditions that exist in a local area or even in an entire country can have a significant impact on the prices that restaurant managers can charge for their menu items. When an economy is robust and growing, managers generally have a greater ability to charge higher prices for the items they sell. When a local economy is in a recession or is weak- ened by other events, a manager’s ability to raise or even maintain prices in response to rising costs may be more lim- ited. In most cases, managers will not have the ability to directly influence the strength of their local economy. It is the manager’s job, however, to monitor local economic conditions and to carefully consider these conditions when establishing menu prices. Local Competition The price a competitor charges for his or her product can be useful information in helping you arrive at your own selling price. It should not, however, be the overriding or determining factor in your pricing decision. It may seem to some foodservice managers that the average guest is vitally con- cerned with low price and nothing more. In reality, small variations in price gener- ally make little difference to the buying behavior of the average guest. For example, if a group of young professionals goes out for pizza and beer after work, the major determinant will not likely be whether the selling price for a craft beer is $5.00 in one establishment or $5.50 in another. This small variation in price is simply not likely to be the major factor in determining which operation the group of young professionals will choose to visit.
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