Guide to Setting Food Prices to Increase Profit

Setting food prices is like crafting the perfect recipe: too many ingredients can result in excess portions, while too few can make the flavor fall short. 

Similarly, with food pricing, you must find the right balance so your culinary business can grow without compromising on quality.

You’ve probably found yourself wondering when to lower prices to attract more customers or when to raise them for higher profits. 

Don’t worry! In this article, we’ll discuss effective ways to set food prices that not only increase your restaurant’s profitability but also keep your customers loyal. Ready to develop a pricing strategy that works?

7 Effective Ways to Set Food Prices

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1. Calculate the Cost of Goods Sold (COGS)

Before setting the price, the first thing to do is calculate your Cost of Goods Sold (COGS). This includes all expenses required to produce a single serving of food, such as raw materials (like vegetables, meat, spices, etc.), labor, and other operational costs (such as electricity, gas, and rent). Be sure to account for every expense to avoid losses.

Example: If the cost of raw materials, labor, and operations for one serving of food totals IDR 25,000, that’s the basic cost you need to consider.

2. Determine Your Desired Profit Margin

After calculating the COGS, the next step is to add your desired profit margin. This is the difference between the selling price and the production cost you want to earn. Profit margins for culinary businesses typically range from 30% to 50%, depending on the type of food and target market.

Example: If you want a 40% profit margin, the selling price can be calculated using the formula:

• Selling Price = COGS + (COGS x Profit Margin)
• Selling Price = IDR 25,000 + (IDR 25,000 x 40%) = IDR 35,000

3. Consider Market Prices and Competitors

Analyzing your competitors’ prices is also crucial. Check the prices of similar foods sold by competitors around you to ensure your price is competitive. Prices that are too much higher or lower than the market average can reduce customer interest.

Example: If competitors are selling a similar dish for IDR 35,000, you could choose the same price or slightly lower to attract customers, as long as quality and service are on par.

4. Account for Perceived Value

Perceived value refers to how customers view the quality of your product. If you offer premium food or high-quality ingredients, you can charge a higher price without losing customers, as long as the price matches the quality.

Example: If you serve high-quality Wagyu steak, you can set a higher price compared to regular steak.

Read more: How to Minimize CAPEX Costs for Greater Efficiency and Faster ROI

5. Set Pricing Strategies Based on Market Segments

Understand who your target market is. Prices should be adjusted according to customers’ purchasing power. For example, if you’re targeting the middle class, prices that are too high might prevent them from buying. Conversely, for an upscale market, you can set a premium price, as long as the quality and experience align with their expectations.

Example: For office workers, you might set more affordable prices, while for higher-end areas or tourist spots, prices can be adjusted to be higher.

6. Consider Portion Sizes and Presentation

Portion sizes and presentation also affect the food price. If your portions are larger or the presentation is more luxurious, the price can be higher. Additionally, this adds more value for customers, as they feel they are getting more for the price.

Example: If you sell a dish like fried rice, make sure the portion is filling or add premium toppings (like crispy chicken or shrimp). This will make the price more reasonable and attractive to customers.

7. Adjust Prices Based on Trends and Seasons

Prices can also be adjusted based on trends or specific seasons. For instance, food prices might be higher during holidays or large events near your location. On the other hand, you can offer discounts or promotions to attract more customers at certain times.

Example: During holidays or major events like Christmas or New Year, you can offer a special menu at a premium price, or during a culinary event, you can offer discounted prices or meal packages.

Read more: Take Your Culinary Brand to the Next Level with These 4 Types of Business Collaborations!

Conclusion

By setting your food prices strategically, you can not only maintain the sustainability of your culinary business but also create a more valuable customer experience.

The right pricing can enhance customer loyalty and support long-term business growth. To make managing your culinary business easier, take advantage of solutions from ESB like ESB POS and ESB Core. 

With features like cost management, sales tracking, and real-time business performance analysis, you can focus more on growing your business. Consult your business needs today!