In addition to practicing as a CPA, Kevin Hedley writes articles on relevant accounting issues. The following article about menu pricing was written for Restauranteeur Magazine. Restaurants are no different. The prices that are charged must be sufficient to cover costs, yield a profit, retain customer base and be competitive. A restaurant usually begins its pricing by reviewing its competitors prices.
Every restaurant has different forces at work when reviewing prices.
Generally, fast food restaurants usually have a greater need to be price conscious than do upscale establishments. All restaurants have some degree of competitiveness with which they must be concerned. Another area which affects the way a restaurant determines prices is their operating results. A restaurant must project into the future what it believes its results can and should be. This projection is enhanced by proper accounting and reporting.