how do restaurants calculate the prices of each dish? Do they accurately do it or just a rough estimate?
In: Economics
Part of it is calculation, and the other part is market value.
If I have a restaurant called “Gaeel’s Gorgeous Gazpacho”, I could probably sell the gazpacho at a much higher margin than other dishes, and even at a higher price than my competitors. i’ll probably sell my fries at a more conventional price, especially since “Freddie’s Fabulous Fries” next door is attracting all of the french fry enjoyers.
Other costs, besides ingredients, are important to take into account too, like rent, salaries, taxes etc…
Also, a restaurant only has a limited number of tables, I’m losing money if my restaurant is full. So if my dishes are popular enough that I’m turning away customers, I ought to price things higher. Maybe some people will choose to eat elsewhere, but that’s only a problem if I lose more customers than I can make up for with increased prices.
Some restaurants even sell some dishes at cost, maybe even at a loss, and make up the difference with upsells.
For instance, there’s a chip shop in my city that sells pretty good fries, at a very good price, especially since they’re on a busy pedestrian street. They make up the difference with sides, like cheeseballs and meatballs, special sauces, drinks, and occasional time-limited dishes. They mostly sell takeaway meals, so seating isn’t too much of a problem. The seating is mostly high tables and stools that don’t encourage sitting around after eating, and they don’t sell any desserts, which also means that their tables are freed quickly, letting them serve more dine-in customers than they would if people stayed seated for longer.
**tl;dr:** The economics of the restaurant industry are complicated, you need to consider ingredients, rent, salaries, up-front costs like equipment and decorations. The people buying the food don’t care how much it costs you to make it, they care about how much they’re going to enjoy it, and they want to feel like they’re getting a good deal. Your competition is playing the same game, and if they’re able to out-price you with a product that is perceived to be better than yours, or they’re located in a more attractive location, you’re screwed.
So the answer is: you charge as much as you can convince your customers to pay, and if that’s not enough to cover your expenses, you’re out of business.
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