MENU PRICING VERSUS PROFIT
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Pricing of the menu items is one of the most important issues when running hotel operations. Despite being important, it is also one of the most challenging issues in this industry. Due to this reason, it is fine to argue that the menu acts as the primary force that attracts customers through the door of a hotel (Lai et al., 2019). More so, the menu serves the driving force that makes customers be willing to pay for the various food types offered in a hotel. In line with this, it is clear that menu pricing is an aspect of hotel management that directly affects the restaurant’s profits margin. This paper seeks to present my philosophy on this issue of menu pricing versus profit.
When addressing the issue of menu pricing and profit, I would prefer not to rely on one factor but on several factors that affect consumer decisions. However, my philosophy on menu item pricing and profit requires that before incorporating other factors to make a decision on a price for a menu item, there should be an ideal price of the item (Taylor, Draper, & Hammond, 2018). However, this price, being ideal, makes it not viable, and thence it must be affected by some factors that could either lower or raise it. In this case, the ideal price for selling a whole Lobster must first be obtained by dividing the cost of raw Lobster by an ideal food cost percentage. In this case, the ideal price is
The unit price for a raw Lobster = $ 8.95/lbs.
Average weight for a raw Lobster = 1.25lbs
The actual price for a raw lobster = 125/100 * 8.95 = 11.187
Take average food cost percentage for Whole lobster = 45%
Then, the ideal price for whole lobster = 11.187/45% = 24.86
However, this is the ideal price and not the actual price. Consider that lobsters are kinds of seafood and are mostly assumed to be of class. Therefore, making the price a little higher improves the notion of the class for the food.
Hence, my price for the whole Lobster would be = $26.50
References
Taylor, D. C., Draper, J., & Hammond, R. (2018). Hotel Food and Beverage Services: Cannibalistic or Complimentary. Journal of Gastronomy and Tourism, 3(2), 123-129.
Lai, H. B. J., Karim, S., Krauss, S. E., & Ishak, F. A. (2019). Can restaurant revenue management work with menu analysis?. Journal of Revenue and Pricing Management, 18(3), 204-212.