Pricing basics
This Pricing basics Info Guide gives you practical information about how to set your prices to improve your profits.
When setting prices, you need to balance the needs of your customer with your profit requirements. Every restaurant is different - to set the right prices, you need to know your:
Timing also plays a key role in pricing.
The price that you charge depends on the type of restaurant business you are running. For example, a theme-based steak-house and a fast food restaurant will charge different prices. If you deliver high-quality meals you can charge more than if you are focused on value for money.
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To successfullly provide customers with the product and service they want, you need to know:
- who your customers are.
- what price they are willing to pay.
- what experience they expect in return for the price charged.
You can then set more competitive prices.
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To provide a satisfactory customer experience, consider the folllowing:
How can I make my restaurant more appealing to my target customers?
- Improve the presentation of your meals.
- Use improved or specialist ingredients, eg, organic or gluten-free.
- Offer new and exciting menu dishes.
- Add a third course for the price of two or offer competitive early bird menu options.
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Remember!
Competition influences the maximum price for which a product or service can be sold.
What restaurants or businesses do you compete with? Find out how much your competitors charge their customers and what they offer for the price charged.
Differentiate
Why would your target customers prefer a competitor’s restaurant to yours? Establish a perception about your restaurant that will differentiate it from competitors. To stand out from your competitors, you need to market your point of difference, eg, excellent customer service.
Establish and reinforce your unique position in the mind of your customers.
Competitive advantage
Any advantage that you have over your competitors will help to make your restaurant more appealing than those of your competitors. Your competitive advantage may be a unique superior service that only you can offer, eg scenic location or entertainment. You can also gain competitive advantage if extra value is included in the price which you charge.
Identify the benefits you offer
Identity the unique benefits of your restaurant business, together with the level of service or standards which you provide, and communicate this information to your target customers.
Work together
Visit other restaurants and find out how customers respond to the kind of customer experience that you are trying to create. Build networks with other businesses that you might view as competitors.
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You need to estimate all the costs incurred in running your restaurant to ensure that your pricing makes a profit.
For practical help with costs and profits, see:
Cost control
Profit basics
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Seasonal business
If your business is seasonal you may be able to charge a higher premium in summer than during winter.
Perishables
Perishable food has no value after its sell-by-date. Offer special offers to customers to sell food that may spoil if unsold.
Evening meals
Do you cater for the lunch trade or evening meals? Generally you can charge more for the same meal in the evening.
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Consider these key points when deciding what price to charge:
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