Question

question 1) describe these three methods for establishing menu pricing ?

1.Matching competitors’ prices
2. Calculating prices from costs and cost percents
3. Adding desired contribution margins to portion costs

question 2) What sales techniques might management suggest that sales personnel
can use to -
a. Improve gross revenue and average cheque?
b. Increase tips?
c. Sell a menu item prepared in excess quantity that must be thrown away
if not sold?

Answer 1

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question 1) describe these three methods for establishing menu pricing ?
1.Matching competitors’ prices
When one retailer agrees to match a lower price from a competitor, typically if the shopper presents evidence of the better price. On its surface, a price match strategy is set up to benefit the shopper at the detriment of the retailer.
2. Calculating prices from costs and cost percent's
Before designing the menu, its essential to determine menu pricing for each item. To do this means calculating food percentages down to the very last item.
It requires to breakdown the menu items by portion cost, calculate overhead, and decide margins. However, with a pricing strategy that considers all operational aspects, the menu must be set up to generate profits from the beginning.
3. Adding desired contribution margins to portion costs
The contribution margin pricing method sets the price of a menu item by adding the desired profit per customer to the average price of the total costs per customer. Each customer contributes the same amount of profit and shared portion of expenses to the business.
The contribution margin is determined by first identifying the total non-food costs of operating the restaurant such as rent, utilities, labor, and cleaning supplies over a certain period of time. Secondly, the total dollar amount of profit is to be determined. The sum of these two numbers is then divided by the expected number of guests to give the contribution margin.
question 2) What sales techniques might management suggest that sales personnel can use to -
a. Improve gross revenue and average cheque?
Improving gross revenue means to try to increase the total sales by anyway possible.
What is average cheque? Well whenever you go to Mac Donald's and order burger waiter will always ask to add fries or cold drinks at low price. This is called average check policy. It works every time and customer is also happy due to low pricing of second item.
b. Increase tips?
Tips belong to waiters and not restaurant. So it does not affect sales.
c. Sell a menu item prepared in excess quantity that must be thrown away if not sold?
If excess quantity is prepared and the restaurant don’t want to throw it then it should be sold in discount. It may not increase sales.
So answer is
Improve average cheque always.