You’ve probably heard that voice in the back of your head for a while now. The one that says, “I should probably raise my prices.”
Maybe your food costs have crept up. Maybe your margins feel tighter than they used to. Maybe you ordered Chick-fil-A for the family last week and spent a hundred bucks. And then it hit you that even they’ve raised prices, and nobody stopped going.
But then the head trash kicks in. What if my regulars stop coming? What if I price myself out of the neighborhood?
After working with restaurant owners in Memphis and beyond for over 20 years, we’ve learned that the problem usually isn’t whether you should raise prices. It’s that most restaurant owners try to raise prices without first understanding what their food actually costs them. And that’s where things go sideways.
This article walks you through how to think about menu pricing the smart way, so that when you do make changes, they’re based on real numbers, not guesswork.
Specifically, we’re going to break down how to calculate your real food costs, why portion control quietly wrecks margins, how inventory issues distort your numbers, and what to fix before you raise a single price.
Why a Flat 10% Restaurant Menu Price Increase Doesn’t Work
This is the most common approach we see, but it’s one of the least effective.
Every item on your menu has a different cost structure and a different margin. Some items might already be priced well and generating solid profit. Others might be losing you money on every sale, and a 10% bump still won’t fix that.
A flat increase can actually make things worse. It can push your well-priced items into “overpriced” territory while barely moving the needle on the ones dragging down your margins. It’s a blunt instrument when what you need is a scalpel.
Pricing should be strategic, not reactive. And strategic pricing starts with understanding what’s really happening behind each dish on your menu.
Calculate Your Real Restaurant Food Cost Before Setting Menu Prices
This is the foundation everything else builds on. And it’s where most restaurant owners have the biggest blind spot.
There are two numbers you need to understand: theoretical food cost and actual food cost.
Your theoretical food cost is what a dish should cost based on the recipe—the exact ingredients, portions, and quantities. If a burger is eight ounces of beef, a slice of cheese, two pickles, a bun, and condiments, you can calculate exactly what that costs based on what you’re paying your supplier.
Your actual food cost is what that dish is really costing you after spoilage, waste, portion inconsistencies, and all the little things that happen between the delivery truck and the plate.
The gap between those two numbers is where your money quietly disappears.
Let’s say your theoretical cost on a burger is $2.45, and you want your food cost to be around 25% of the sale price. Multiply $2.45 by four, and you get roughly $9.80. That’s your target menu price.
But what if your actual cost is closer to $5.00 because that six-ounce patty turned into an eight-ounce patty on the line, a jar of pickles went bad, and your vendor substituted a higher-priced cheese without you noticing? Now that $9.80 burger is barely breaking even.
This became painfully obvious during COVID when egg prices spiked. Some restaurants were selling omelets for $9 with three eggs costing $2.50 each. The food cost alone nearly wiped out the entire sale, and most owners didn’t catch it fast enough because they weren’t tracking theoretical versus actual regularly.
→ Start here: Pull up your POS data, identify your top 10 most frequently sold items, and back into the real cost of making each one. Your top 10 items are where to focus first because if you’re losing money on every one and selling 200 a day, that adds up fast.
How Poor Portion Control Destroys Restaurant Profit Margins
You can have perfectly calculated menu prices and still lose money if your portions aren’t consistent.
The six-ounce patty that becomes an eight-ounce patty is one of the most common margin killers we see. It doesn’t happen maliciously. It happens because line cooks are eyeballing it, being generous, or rushing through a busy shift.
There’s a reason brands like Chipotle have a specific scoop for the beans, a specific scoop for the rice, and exact portion standards for every ingredient. Portion control is what makes their menu pricing actually work.
If your portions aren’t standardized, your theoretical food costs are meaningless. You built your pricing around a six-ounce patty, but you’re serving eight. That means your food cost is 33% higher than planned, and your margin just got a whole lot thinner.
This goes beyond kitchen management. It’s a profitability issue that shows up in your food cost percentage every single month. And it’s fixable with clear portioning standards, training, and accountability.
Why Large Restaurant Menus Increase Food Costs and Waste
Walk into a lot of family restaurants and you’ll see menus with 60 or 65 items. Every one of those items has a different set of ingredients, a different cost structure, and a different margin.
The more items on your menu, the more ingredients you carry. And that makes it harder to manage your food costs…and harder to price anything strategically.
When you’re buying an ingredient that only goes into a handful of dishes, the chance of it spoiling before you use it all goes way up. Low-volume ingredients create waste. Waste drives up your actual food cost. And suddenly a dish that looked profitable on paper is costing you more than you thought.
On the flip side, fewer menu items at higher volume means fewer ingredients, better purchasing power, less waste, and margins that are a lot easier to manage.
How to Increase Average Ticket Size Without Raising Menu Prices
Raising prices isn’t just about changing the number next to a menu item. Sometimes, it’s about finding opportunities to get more dollars out of each visit.
Think about Chick-fil-A. Part of the reason that family order hit a hundred bucks wasn’t just higher individual prices. It’s how well they package things together. Meals, combos, sides, drinks. They’ve made it easy to spend more per visit.
For sit-down restaurants, this looks like suggestive selling. How often does your server ask about appetizers? Dessert? Those little additions per table add up in a hurry when you’re turning 50 or 100 tables a night.
The metric to watch is your average ticket price per table. If you can increase average ticket size by training your team to suggest (not just take orders), you’re effectively raising revenue without touching your menu prices.
One caveat, though: Upselling only works if those items are priced profitably. If your dessert is losing you a dollar every time you sell it, pushing it harder just means you’re losing money faster.
Why Accurate Restaurant Inventory Is Critical for Menu Pricing
This one sneaks up on people. You might think you have a pricing problem when what you really have is an inventory problem.
If your inventory data is bad, you can’t trust your food cost numbers. And if you can’t trust your food cost numbers, any pricing decision you make is a guess.
You ordered eight cases of something, but only seven showed up…and nobody caught it. Your food vendor substituted a different product at a higher price, and it slipped through unnoticed. Your team is doing inventory counts and just estimating because they’re busy.
All of that is profit leakage. And it makes your food cost data unreliable.
When you don’t trust your data, one of two things happens:
- You avoid raising prices because you’re not sure if you actually need to.
- You raise prices without knowing whether the increase will fix the margin problem.
Both are bad outcomes.
Clean, accurate inventory management is the prerequisite to confident pricing. You have to trust what your numbers are telling you before you can make smart decisions based on them.
Menu Pricing Strategies for Multi-Location Restaurants
If you’re operating more than one location, you need to be mindful that what it costs to make a dish at one store might be different from what it costs at another.
Maybe your vendor contract in Memphis gets you a better price on certain proteins than your location in Little Rock. Maybe one store has access to a specific ingredient that the other has to substitute at a higher cost.
Uniform pricing across locations only works if your food costs are uniform too.
If you’re running the same menu prices across all locations without checking the cost differences, you could be profitable at one store and underwater at another (and not even know it).
For multi-location operators, item-level cost visibility per store is essential.
A Smarter Restaurant Menu Pricing Framework
Before you raise a single price, walk through these five steps:
- Calculate theoretical food cost for your top-selling items.
- Compare it to actual food cost and identify the gap.
- Standardize portions to protect your margins.
- Clean up inventory processes so your data is reliable.
- Look for ways to increase average ticket size before raising prices.
That’s how you turn pricing from a reactive decision into a strategic one.
Smart Menu Pricing Starts Before the Price Change
Menu pricing isn’t something to fear. It’s something to get right. And getting it right starts well before you change a single number on the menu.
Restaurant pricing doesn’t fall apart because owners are careless. It falls apart because the data underneath it isn’t clear.
If you’ve felt like your restaurant is busy but the profit isn’t showing up the way it should, there’s a good chance pricing isn’t the real issue. It's probably visibility.
Now that you understand how theoretical food cost, portion control, inventory accuracy, and average ticket size all connect, you can make pricing decisions based on facts instead of fear.
If you’re not sure where your profit leaks are coming from, your next step should be reading “Why Your Restaurant Is Busy But Not Profitable: 7 Hidden Profit Leaks.” That article will help you identify whether pricing, waste, or inventory is actually the problem before you touch your menu.
At Patrick Accounting, we work with restaurant owners across Memphis and beyond to bring clarity to the numbers behind their operations. When your data is clean, pricing becomes a strategy, not a gamble.
If you want help getting that clarity, we’re here.
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