Contribution the method

1. Menu Pricing reflect the overall cost of running the operation These prices the costs needed to purchase, prepare and service it as well as labor rent utilities etc. The success of and operation depends on correct menu prices.

2. Contribution the method $ 100,000. gross food sales - $ 40.000. cost of food sold = $60,000. gross profit ( total contribution margin) $ 60,000. ( total contribution margin) -$50.000. fixed/ overhead Equation to calculate contribution margin is: your total gross food subtract (-) Cost of food sold equals (=) total contribution margin) • Shows how much a certain menu item adds to the profit of the restaurant. • Important to know portion cost • Restaurant will figure out how much money above the raw food cost you will need to cover your overall cost of the business.

3. Food Cost Percentage Method • Step onefoodcost percentage is food cost divided [÷] food sales • To calculate the food cost percentage using examples. • Projected monthly food cost is $18.000. • Monthly food sales is $62,000. 18,000.÷ $62,000. = 0.29 • Step two ----Once you have your food cost percentage you can cost your menu item • Items cost ÷ Food cost percentage = price Example Raw food cost $1.12 $1.12 ÷ 0.29 = 3.89 /$3.89 You can charge $3.89 or round up the recipe to $4.00 a portion.

4. Average check method • Menu pricing manager divides the total revenue by the number of seats, average seat turnover and days open in one year.

5. Straight Markup Pricing Method Multiply raw food cost by predetermined fraction Example: 1 slice of apple pie cost $0.63 if you use a 2/3 (.66) markup amount the you would charge on a menu will be $1.05 a slice Raw food cost x mark up amount= amount added to raw food cost for menu price $0.63 x 2/3 = 0.42 0.42 + $0.63 = $ 1.05