Transcript F&B_Chapter_07

Standard Product Costs and
Pricing Strategies
Oğuz Benice
Bilkent University
THS 52126
F&B Operations
Spring 2008
Standard Recipes
7. Repeat
Business
1.Standard
Recipe
2. Consistence
in Quality
6. Guest
satisfaction
5. Consistence
İn Apearance
3. Consistence
İn Flavor
4. Consistence
İn Portion size
Developing Standard Recipes
List all ingredients in the order they are used
List type and quality of ingredients
List amount of ingredients (quantity)
List cooking and preparation procedures
List cooking and procedure time
List cooking and procedure material to be used
List any needed garnish or sauces
Developing Standard Recipes
Indicate the type and size of serving dish and
service procedure.
Test the recipe by different cooks
Evaluate the recipe (if necessary correct it)
Take a picture of the finished product
Record the recipe in the computer
Print the recipe
PRICING & DESIGNING THE MENU
Demand Oriented Price
Market Skimming (Selective Market Penetration):
In the market skimming approach to pricing,
operators use a relatively high price to attract a
small segment of the market, who can and will
pay the higher prices, where the competition is
probably to undercut the prices set for similar
products, and where the customers perceive that
the value given in the form of the restaurant
experience is greater than the prices charged.
PRICING & DESIGNING THE MENU
Demand Oriented Price
Market Penetration: market penetration on the
other hand, involves setting prices as low as
possible, while still contributing to profits. In
general, lower prices generates greater sales
volume and long term profitability. This
philosophy works best when demand is price
elastic, that is, when changes in price result in a
greater change in demand. 
PRICING & DESIGNING THE MENU
Competition Pricing
Competitive pricing establishes prices
according to those set by the competition.
Prices are typically slightly below or above
those of the competition.
It is not advisable to compete principally on
the basis of price, because price is a factor
that can be easily be met by a strong
competitor. 
PRICING & DESIGNING THE MENU
Menu Price Rounding Strategy
When a restaurant sets menu prices by only applying a formula,
you see strange prices such as YTL7.32 or YTL 19.68
Value perception pricing dictates that for mid and expensive
items, the guest does not recognize price points other than $0.50.
When the guest subconscious “read” one cheap price, they only
see the 2 in YTL 2.95. As a general rule, menu items with price
points set as level of .25, .50, .75 and .95 seem to be friendly. In
other words, if you can charge YTL1.15 for a menu, you can
probably charge YTL1.25 without any resistance. Once a
restaurant operator just apply this simple pricing philosophy, the
profit will increase by at least 2-3%. 
PRICING & DESIGNING THE MENU
Page Positioning
There are two theories regarding the placement of items on a
menu: Menu Sequence & Focal Points.
Menu Sequence: Some believe that sequence of dishes on the
menu should follow the progression of a meal. Others believe
that focal points should be used on a menu. Customers’ eyes are
naturally drawn to specific points, focal points, when presented
with a menu. The restaurateur should place menu items that
he/she wants to push in the focal points of a menu.
PRICING & DESIGNING THE MENU
Menu Item Placement
P
P
P
4.50
6.95
9.50
6.95
5.95

Highest selection rate

Lowest selection rate

Highest selection rate
P
P

P


Lowest profit
Lowest profit

Highest profit
COLD APPETIZERS
Slices Tomatoes with Anchovies
Avocado with Grapefruit
Shrimp Salad with Calypso sauce
Spinach Salad
Ceasars Salad
MAIN COURSES
Blackened Red Snapper
White Sea Bass
Chicken Breast Oskar
Sand Dabs Meuniere
Tiger Prawns
Dijon Saute
Fettuccini Alfredo
Swordish Pacifica
12.50
14.95
17.95
21.50
19.95
17.50
13.95
12.95
Highest profit
2. Organizing
Organizing answers the question:
“how can we best use our limited human
resources (employees) to reach our objectives”.
Organizing also involves establishing the flow of
authority (organization chart) among people.
Chef
Chef saucier
Chef rotissier
Pastry chef