How to Price a Restaurant Menu
Price dishes from cost, market and value. Work through the cost plus method, price points, delivery prices, VAT and how often to review a menu.
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Key takeaways
- Look at three things together: what the dish costs you, what similar places charge, and what the dish is worth to your guest.
- Price from a target gross profit in money, not from a markup you copied from someone else.
- Delivery and dine in prices can differ, as long as you are open about it and the rules where you trade allow it.
- Review prices at least twice a year and whenever a major ingredient changes.
In short: price each dish from three angles. First, what it costs you. Second, what comparable places nearby charge. Third, what the dish is worth to your guest. Then set prices that leave the money you need after ingredients, and test them on your numbers before you print the menu.
Prices and tax rules described here are general; check your local rules.
Pricing is the quickest way to change your profit and also the easiest to get wrong, because it feels personal. It helps to work in the same order each time.
Step 1: Know the cost of every dish
You cannot price a dish you have not costed. Use the method in our recipe costing guide: every ingredient, the usable yield, the portion and the cost per plate. Include small items that add up, such as oil, garnish, bread on the table and the sauce on the side.
Update the cost each time a major supplier price changes. See suppliers and ordering.
Step 2: Decide the profit each dish must leave
Think in money. If a dish costs 4.00 to make, what do you need it to leave?
Look at the whole business. Your gross profit and prime cost must cover labour, rent and everything else. If you aim for ingredient cost around 30% of the selling price excluding tax, a dish that costs 4.00 sells for about 13.33 before tax. That is the cost plus method:
Price before tax = ingredient cost / target food cost percentage.
Your target can differ by dish type. Many kitchens accept a lower percentage on fish or steak and a higher one on pasta or soup. What matters is the average across what you actually sell. See food cost percentage.
Step 3: Look at the market
Collect the menus and online prices of five to ten places that compete for the same guest at the same time of day. For each of your key dishes note:
- The price of a similar dish.
- The portion and quality.
- How full the place is at peak.
You are not copying; you are placing yourself. If you are 20% above everyone, can you explain why on the plate and in the room? If you are lowest, is that on purpose?
Step 4: Think about value for the guest
Guests do not compare your ingredient cost. They compare the experience with the price. Some dishes carry higher value than their cost suggests: a dish with skill, a signature dish, a generous sharing plate, a seasonal special.
Others carry lower value than their cost: a commodity side, a plain salad, a drink that guests know the shop price of. Price these closer to the market.
Ask your servers which dishes guests say are "worth it" and which they hesitate over. That is data.
Step 5: Set price points, not just prices
A menu works better when prices have a pattern. Plan a few price points in each section, such as a lower priced option for the careful guest, a middle group where most sales sit, and one or two premium dishes.
Check that steps between prices make sense. If the burger is 12 and the steak is 24, the middle needs a reason. Use menu engineering to see whether the mix of high margin and popular dishes is right.
Fair ways to guide choices
Guests can be helped, not tricked. Methods that are honest and common:
- A clear "chef recommends" or "most popular" tag, only if it is true.
- Dishes grouped logically rather than by price.
- Descriptions that tell the guest what it is and why it is good.
- A photo on the online menu for dishes you want guests to see.
Avoid hidden charges, misleading "from" prices and anything that conflicts with consumer protection rules. Prices must be clear and complete in most jurisdictions.
Step 6: Price drinks, sides and extras
Drinks usually carry a much higher margin than food, so they matter for profit. Cost them as carefully as dishes: measures, ice, garnish, wastage and glass breakage.
Sides and extras (extra cheese, a dip, a bigger size) are a way to raise the average spend honestly. Price them so that the guest still feels it is fair. If an extra costs you 0.50, selling it at 1.50 is common; check against competitors.
Step 7: Price for each channel
Dine in, collection and delivery are not the same business.
- Dine in carries service, space and often a service charge. See tips and service charges.
- Collection has packaging but no table, so some restaurants offer a small discount to encourage it.
- Delivery adds packaging, driver cost and sometimes platform commission. Some restaurants set a higher menu price or a delivery fee. Marketplace terms may restrict price differences, so read them. See stop paying delivery app commission and takeaway and delivery profit.
With your own ordering site you set the prices and the fees. DineHarbor's online ordering lets you manage your menu and charges in one place, with no commission on orders. Check the pricing page for plan details.
Step 8: Get the tax display right
Rules differ:
- In the UK and the EU, prices shown to consumers are normally shown including VAT. In the UK, the VAT treatment of hot takeaway food differs from cold food. See VAT on UK takeaway food.
- In the US, sales tax is normally added at the till and varies by state and city.
- In some Gulf countries, VAT or service fees are shown on the menu in specific ways.
Ask your accountant or tax authority how to display and charge tax where you trade.
Step 9: Test, then watch
Before you reprint, check the new menu on a spreadsheet:
- Recalculate average margin using last month's sales mix.
- Check that no popular dish drops below your minimum margin.
- Check how much extra revenue a small rise produces. Many restaurants find a small rise on a popular dish adds more than a big rise on a rare one.
After the change, review sales mix, complaints and the average spend for four weeks. If one dish fell off sharply, you may have gone too far; return it to the old price or add value to the dish.
Common mistakes
- Copying a competitor's price without their costs. Their rent, labour and supplier prices are not yours.
- Pricing everything the same percentage. Some items deserve more, some less.
- Freezing prices for years. Costs rise, so a long freeze followed by a big jump is harder.
- Ignoring labour. A dish that takes long to prepare may need a higher price.
- Not updating the online menu. Prices on your website, ordering page and third party listings should match. See restaurant website with online ordering.
A pricing review checklist
- Costs updated for the top 20 dishes.
- Target margin per section set.
- Market check done in the last six months.
- Allergen and description checks done.
- Tax display checked.
- Delivery and dine in prices decided.
- Online menu and printed menu match.
Telling guests about a price rise
Most guests accept small, fair rises when they are clear and rare. Do not hide a rise inside a menu redesign. Change the prices on the website, the ordering page and the printed menu on the same day, and make sure staff know the new prices before the first service. If you receive a complaint, explain calmly that ingredient and wage costs have risen, then offer the guest a lower priced dish. Never argue about it at the table.
For delivery menus, check each platform's rules before you set different prices. Some marketplaces require price parity, and others forbid it. Your own ordering site is the place where you stay in control.
Ready to change prices once and see them everywhere? Start the 30 day free trial with no card needed.
Questions and answers
What markup should I use on food?
There is no universal markup. Many kitchens aim for ingredient cost of around 25% to 35% of the selling price excluding tax, but that varies with the type of restaurant and the labour in each dish. Start from your own costs and your target profit.
Should menu prices include VAT or sales tax?
It depends on the country. In the UK and EU, consumer prices are normally shown including VAT. In the US, sales tax is usually added at the till. Check your local rules.
Can I charge more for delivery orders?
Many restaurants do, to cover packaging and delivery costs. Be open about it, keep it fair, and check marketplace rules that may stop you charging more on their platform.
How often should I raise prices?
Review twice a year and whenever a key cost jumps. Small, regular changes are easier on guests than a big rise after a long freeze.
Should I end prices in .99 or use round numbers?
Either can work. Premium places often avoid currency signs and cents, while casual places use charm prices. Pick one style and use it consistently.
See it in DineHarbor
About the author
Editorial team
The DineHarbor team writes this blog for restaurant owners and managers. Every article is checked against the product before it is published, so what we describe is what the software does.
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