Designing a restaurant menu necessitates a significant financial commitment, contingent on factors such as style, texture choices, and graphics. Interestingly, these elements do not necessarily correlate with profitability. In fact, the most aesthetically pleasing and well-designed menu may not be the one that generates the highest sales or attracts the most customers.
So when setting sales prices, you have to take into account for example :
- Your competitive environment
- Your values and vision
- Current economic conditions
- Sourcing and products with the best quality-price ratio
- Your competitive advantages
Principle 1: Opening of the Range
Firstly, the entry-level represents the breadth in price of a range, meaning the difference between the price of the cheapest dish on the menu or ingredient compared to the most expensive. The range is thus a product family such as:
- Appetizers
- Main Courses
- Desserts
- Drinks
The “entry-level” indicator is therefore the ratio between the highest and lowest prices within a range on your menu. Ideally, this ratio falls between 2.5 and 3. A ratio below 2.5 would likely indicate an ultra-targeted offer that does not allow for measuring sales and determining if it aligns with our target audience.
Principle 2: Price Dispersion
keeping the same ranges as in the previous paragraph, price dispersion represents the distribution of prices within these ranges. We then divide the selling prices of dishes in this range into 3 equal brackets:
- High bracket: the top third of prices
- Average or median bracket
- Low bracket: the lowest third of prices
For example, if the range goes from €3 to €9:
- High bracket: from €7 to €9
- Middle bracket: from €5 to €7
- Low bracket: from €3 to €5.
In this principle, the number of dishes in the middle zone should be equal to the sum of the low and high zones.
Principle 3: Customer Reactions to Prices
- This principle is undoubtedly the most important and effective in the long term. It allows measuring if the offer proposed on the menu corresponds to the demand of the customers. It measures the coherence of the menu and the selling prices of the dishes in relation to the clientele to know on which price range it positions itself the most. In fact, for this index, we keep the same range of products used previously.
By calculating the average of the prices offered on the menu and the average basket within this range, we obtain 2 figures:
- The average of the offer = total prices of the range / number of dishes in the range
- The average of the demand = turnover of the range / number of customers
The ratio between the averages of the demand and the average of the offer gives the desired indicator, the reaction indicator to the prices of the products.
If the ratio is <0.9: the average of the offer is too low. Therefore, we can add a higher-priced product or perhaps remove a cheaper product to adjust the offer.
If it is > 1: the average of the offer is too high. We can thus add a cheaper product or rather remove a more expensive product to adjust the offer.
In conclusion, an IRP index of 0.99 <1 indicates that your customers tend to choose slightly cheaper dishes. Here, the task will be to adjust the price range by removing the dishes at the higher end of the range and/or adding dishes at the lower end of the range to your restaurant’s menu.
In this method, since we cannot influence the average demand, we modify the offer. We can simply adjust certain prices, but ideally, it is best to combine this technique with other methods.
Principle 4: The Emphasis
Ultimately, the Omnes Principle of promotion revolves around adjusting dish prices. These prices should consistently fall within the median zone, reflecting an average price. A promotional dish or menu isn’t simply a low-cost option; rather, it’s a dish offered at an appealing price point aimed at boosting its popularity. The goal is to spotlight specific dishes or menus to enhance their appeal. The overarching objective is to promote high-margin items, dishes, and products with significant profit potential.
In summary, a restaurant’s pricing strategy results from a blend of approaches. Utilizing a restaurant management software can streamline the implementation of the Omnes principle. Furthermore, complementary techniques like menu engineering can enhance these methods, ultimately optimizing your menu’s profitability.