About This Chapter
Food & Beverage Pricing Methods - Chapter Summary
Study this chapter to examine several pricing methods in the food and beverage industry. Our expert instructors help you understand the differences between objective and subjective pricing methods in food and beverage operations. You'll also define other food pricing methods, such as the highest price method and simple markup price method, and reinforce your understanding with short self-assessment quizzes. The chapter is designed to help you:
- Differentiate between objective and subjective food pricing methods
- Explain the reasonable price, highest price, loss leader price and intuitive price methods in subjective pricing
- Outline several objective food pricing methods, including simple markup price, contribution margin price, ratio price, simple prime costs and specific prime costs methods
1. Subjective vs. Objective Food Pricing Methods
In this lesson, we will briefly summarize the differences, advantages, and disadvantages of subjective and objective methods of food pricing in a restaurant setting.
2. Food Pricing: Reasonable Price Method
Establishing food prices is an important activity that requires research, calculations, and evaluation of the market. The reasonable price method is one way many restaurant managers use to determine prices, although it has many flaws.
3. Food Pricing: Highest Price Method
In this lesson we define the highest price method of food pricing and look at an example of how this subjective approach is applied in a restaurant setting.
4. Food Pricing: Loss Leader Price Method
In this lesson, we will review what the loss leader pricing method is and how it can be used to generate profits in the restaurant industry; despite the paradoxical situation of selling some items at a loss.
5. Food Pricing: Intuitive Price Method
For the restaurant owner who is willing to take risks or who wants to avoid lots of calculations, the intuitive price method offers a technique for planning the prices of menu items. In this lesson, we will see how this works in a practical setting.
6. Food Pricing: Simple Markup Price Method
In this lesson, we will look at three different forms of simple markup pricing and show how these objective methods can be used to determine appropriate prices for restaurant menu items.
7. Food Pricing: Contribution Margin Price Method
In this lesson we will review how the contribution margin pricing method can be used to set menu prices when the owner wants to account for how each item contributes to the expenses and profit of a business.
8. Food Pricing: Ratio Price Method
In this lesson, we will briefly review how restaurants can use the ratio pricing method to calculate menu item prices that adequately account for costs of food and restaurant operations while still meeting profit goals.
9. Food Pricing: Simple & Specific Prime Cost Methods
This lesson covers how to set menu prices using two different objective pricing methods: the simple prime cost method and the specific prime cost method. Formulas and example calculations are provided for each method.
Earning College Credit
Did you know… We have over 200 college courses that prepare you to earn credit by exam that is accepted by over 1,500 colleges and universities. You can test out of the first two years of college and save thousands off your degree. Anyone can earn credit-by-exam regardless of age or education level.
To learn more, visit our Earning Credit Page
Transferring credit to the school of your choice
Not sure what college you want to attend yet? Study.com has thousands of articles about every imaginable degree, area of study and career path that can help you find the school that's right for you.
Other chapters within the Hospitality 309: Food & Beverage Service & Operations course
- Intro to Food & Beverage Operations
- Feasibility Planning for the Restaurant Industry
- Marketing Fundamentals for Restaurants
- Menu Planning Basics
- Food & Beverage Costs & Purchasing
- Food & Beverage Storage
- Inventory Control for Food & Beverage Services
- Restaurant Food Production
- Food Preparation Basics
- Food Preparation Safety
- Types of Restaurant Service
- Restaurant Service Overview
- Serving Alcoholic Beverages
- Restaurant Design & Equipment Selection
- Financial Management for Food Service
- Food & Beverage Industry Trends
- Required Assignments for Hospitality 309