Menu Pricing Methods for Your Food Truck Business
Setting prices for the products you sell from your food truck is one of the most crucial components to running it, because the prices you set directly affect your ability to sell, cover costs, and generate your desired level of profit.
Restaurant food cooked on the premises is normally priced on a per item basis. Typically, prices of menu items vary according to food costs (the actual amount it costs you to make dishes) and sometimes according to demand. For example, if your truck is famous for serving a unique dish, you may be able to use a higher markup to your costs of preparing it.
Most food service establishments target food-cost percentages between 20 and 40 percent. In other words, if a menu item’s total food costs are $2, its sale price should be between $5 (40 percent) and $10 (20 percent). You can adjust the actual percentage you use as you deem necessary. For items that require more time and labor to prepare, you may have to increase the percentage to keep your pricing competitive.
New restaurant and food truck owners alike typically use one of the following methods to determine menu pricing:
Food-cost percentage pricing
These methods are merely guidelines for your use and aren’t absolute rules. If your market will bear menu item pricing that exceeds what you come up with by using these methods, do it!
Food-cost percentage pricing for your food truck business
The food-cost percentage pricing method is the most widely used method for menu pricing. To determine prices with this method, you need to know the target food-cost percentage and the actual food cost for the item, which you plug into this formula:
Food cost ÷ target food-cost percentage = menu price
For example, suppose you have a cheeseburger on your menu with a food cost of $1.50 (meaning that the ingredients used to make one cheeseburger costs you $1.50), and your target food-cost percentage is 35 percent. The calculation to price this item is as follows:
$1.50 ÷ 0.35 = $4.30
To get an idea of how various cost percentage affects your prices, take a look at these numbers:
|Percentage||Food Cost||Menu Price (min)|
Food cost is only one part of the equation here. This formula doesn’t take labor or other operational costs into consideration. So the lower you can get your food costs, the better off you’ll be, and the more you’ll have left over for labor and overhead.
Factor pricing for food truck menu items
The factor pricing method uses a factor, such as 30 percent, that represents food-cost percentage. To determine prices with this method, you multiply the food cost by your pricing factor. To calculate the pricing factor and the menu price, you need the target food-cost percentage and the actual food cost for the item, which you plug into this formula:
100 ÷ target food-cost percentage = pricing factor
Food cost x pricing factor = menu price
For example, suppose your target food-cost percentage is 30 percent. Divide 30 into 100, and you get 3.33 as your pricing factor. If the food cost is $1.50 and the factor is 3.33, you end up with the following:
$1.50 x 3.33 = $5.00
This method doesn’t take into consideration that some foods have a higher cost than others. Factoring has the potential to overprice high-cost food items and underprice low-cost items.