Overhead. Food portions. Ingredient costs. Salaries. When the fun of putting together a menu ends, your attention moves to pricing, and these points become the focus. Food costs tend to make up 30-35% of pricing on menus, leaving enough room to pay for expenses and, most importantly, to make a profit.
It’s a pricing model that works so well; it’s been made famous by celebrity chef Robert Irvine from RestaurantImpossible. In three days, Chef Irvine renovates a restaurant, retrains the staff, and, using the three to one pricing rule, transforms a slumping restaurant into one that makes a profit. The basic formula is as follows:
Food Cost + Labor + Business Expenses including Profit = Menu Price
While dining establishments worldwide have found success with this standard price analysis, there are definitely outliers. Some restaurant and café owners consider good manners to be as important as ingredient shopping, and others employ a pricing model that guarantees reservations will show up.
These atypical models are unusual and innovative, and they’re working like a charm. Below are three new charging models for restaurants, which factor more than profitability into menu prices.
The Etiquette Pricing Model
Rude customers, be gone! These restaurants want nothing to do with you. It would seem those coffee lovers are crankier than the average customer because two coffee shops (that we know of) have developed a pricing model to encourage better manners when ordering.
Across the pond, in France, a restaurant in Nice found it necessary to encourage diners to order coffees nicely. On a sign outside Le Petite Syrah, customers were shown a menu that requested the same ordering style as Cups’–only theirs was in French. Photos of their new menu pricing went viral online.
With an etiquette pricing model, it really does pay to be nice in Nice, France.
In Japan, customers are happy to pay more for a license to be rude at Konro-ya pub in Tokyo. While the initial goal was to get their bar patrons to act more friendly, the added profits aren’t a bad side-effect of changing their pricing model. Konro-ya has reported a steep incline in rude customers, who are having fun with being a jerk. They’ve also added a serve-yourself beer tap, which is much less than ordering a beer from a server, but still see customers placing orders rudely and willing to pay the price.
While the results for Le Petite Syrah weren’t shared publicly, customers at both examples took the new pricing models in good humor.
The It’s-Relative Pricing Model
Would you pay more for a dish at one location, when you know you can get the same dish at another location for cheaper? It’s a question that Sam Polk and David Foster, owners of Everytable, are finding out to answer to. So far, it’s yes.
In 2013, Polk founded a nonprofit called Groceryships to educate parents from low-income areas on better eating habits and the importance of getting nutritious foods. Common feedback was that no healthy, cheap fast-food options were available, and so McDonald’s became the best alternative.
Polk and Foster, two men with finance backgrounds, devised a strategy to combat this dining crisis: Offer a healthy menu of hot and cold dishes, with prices that are relative to other dining establishments in the area.
The first lo