Price Point

A price point is a specific selling price at which a product or menu item is offered. In restaurant menu planning, price points are chosen by considering ingredient and labour costs, portion size, customer expectations, competitor positioning, perceived value and the restaurant’s financial objectives.

How restaurants choose a price point

• Cost and margin: understand ingredient cost, expected yield, waste, labour and the contribution needed to cover operating expenses.
• Customer value: consider portion size, quality, presentation, service and the experience the guest receives.
• Market position: review comparable offers, location, target customer and the restaurant’s concept.
• Menu architecture: consider the relationship between entry-level, core and premium items, including how prices guide choice.
• Demand and elasticity: assess how customers respond to price changes and whether the item is a traffic driver or a high-margin choice.

Example: psychological price points

A restaurant may price a dish at $19 rather than $21 to keep it below a $20 threshold. This is a form of psychological pricing, but it should only be used if the price still supports the required margin and reflects the guest’s perception of value.

Price point versus price range

A price point is one specific selling price. A price range describes the spread of prices across a menu or category. Menu price architecture considers how individual price points work together across the full offering.

How to review a price point

Monitor sales mix, contribution margin, guest feedback, competitor changes and cost inflation. Recalculate costs when supplier prices, portion sizes or recipes change. A price point that worked last season may no longer be profitable or competitive.

Chef’s tip: do not set a menu price from food cost percentage alone. Include labour, yield, operating costs and the value of the overall guest experience.