Jessica Castillo had always been interested in food and cooking. After culinary

Question

Jessica Castillo had always been interested in food and cooking. After culinary school and several extensive apprentice stints with some of the best chefs in New York and a spectacular year in London, Jessica felt she was ready to open her own restaurant. Creativity and customer focus were Jessica’s strengths, as was a firm conviction that she didn’t want her dining room filled only with ‘‘rich people.’’ She wanted to make the types of foods she served available to as wide an audience as possible. Jessica wanted to serve a diverse group of customers, but she also knew she had to make a reasonable profit if she wanted to stay in business. Menu pricing had always puzzled Jessica. In her few years in the hospitality industry, Jessica had already seen several cases of restaurateurs who planned for a 25% or 30% food cost, priced their menu accordingly, and yet failed to generate the profits they needed to stay open. She was keenly aware that many fine dining establishments such as the one she wished to open frequently encountered that very fate.

Assume that Jessica asked you for your input on her menu-pricing quandary. Draft a short paragraph describing your philosophy of the relationship between ‘‘menu price’’ and ‘‘profits.’’

Explanation / Answer

Relation between menu price and profits:

Through menu engineering a price can be which gives customers a low cost menu which increase their average spending which increases the sales and therby profits. So the profit % should be set in such a manner which is profitable for the restaurant and at the same time be nominal for the customers this will help to increase the sales/turnover of the restaurant. There are various ways to set menu price and profits like desired product cost % which adds profit % to cost to set menu price. After that see what is the % it has on selling price like if it is 33% on cost than it is 25% on menu price if it is approximate the % gained in the other restaurants than we can say that the food items are propery charged. Than we should see that the food items which have a lot have demand should be set at a competitve price so customer level can be increased. So menu prices and profits are directly proportional if there is increase in profit there is increase in selling price.So the menu prices should be set taking into consideration of cost, demand, contribution, turnover, quality and desired profits.

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