how do restaurants calculate the prices of each dish? Do they accurately do it or just a rough estimate?
In: Economics
Finally a question I can answer. I worked in restaurant accounting & data analysis/reporting for 15 years.
For smaller mom & pop diners/restaurants, they pretty much guestimate. They know a 10lb can of green beans costs $12 and it contains 12 servings so that’s $1 for green beans. They know a bag of chicken breasts is $7 and contains 9 servings so that’s $0.77 each. They come up with a cost of ingredients, multiply that by something like 2.5x – 4x to cover labor costs and have enough left over to pay things like rent, utilities, insurance, etc.
For large restaurant chains, they have this down to a real science. Let’s use a pizza chain as an example. They use sophisticated point of sale and inventory systems to track everything. They enter recipes into the POS (Point of Sale) system so it knows what ingredients and quantities for every item on the menu.
They take inventory every day and know exactly how much cheese, dough, toppings, etc. they have on hand. The POS tracks every pizza that was sold in a day and based on that information knows exactly how much that inventory for each item should decrease each day. It knows when the pizza-making process began and when it came out of the oven, it knows the pay rate of your cook and how many you have working right now so it can calculate labor cost. It calculates a precise cost per oz of every inventory item, and with the recipes from the POS system, you get a very accurate cost of ingredients + labor for everything on the menu.
This type of system is also really great at making sure the pizzas are made correctly and preventing theft. If the POS system says you sold 200 pizzas and should have used up 125 pounds of cheese, but your inventory shows you used 150lbs of cheese, you know your people are putting too much cheese on the pizza, or someone is stealing it and taking it home for their tacos.
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