1. Three numbers for every item
Update ingredient prices from this quarter's invoices first; a review on stale costs is a guess. Then write down each item's ingredient cost to the cent, its menu price, and the units it sold in the last 13 weeks.
2. Find the items over target
Divide cost by price. The sample shop's target is 30 percent, and three drinks are over it:
| Item | Cost | Price | Cost % | Price at target | Units last quarter |
|---|---|---|---|---|---|
| Oat milk latte 16 oz | $2.35 | $6.25 | 37.6% | $8.00 | 3,190 |
| Chai latte 16 oz | $2.10 | $5.75 | 36.5% | $7.00 | 1,270 |
| Cold brew 16 oz | $1.75 | $5.50 | 31.8% | $6.00 | 2,700 |
Price at target is cost divided by the target, rounded up to the next quarter. It is a ceiling to know, not a rule: the market will not pay $7.00 for chai.
3. Raise the sellers by a quarter or two
All three sell well, so each gets a new price. Move a few items 25 to 50 cents, not the whole menu 5 percent; a whole-menu increase gets noticed. Round to the quarter: $5.50 to $5.75 is invisible, $5.50 to $5.60 looks like an accountant did it.
| Item | New price | Cost % at new price | Added over a quarter |
|---|---|---|---|
| Oat milk latte 16 oz | $6.75 | 34.8% | $1,595 |
| Chai latte 16 oz | $6.25 | 33.6% | $635 |
| Cold brew 16 oz | $5.75 | 30.4% | $675 |
| Total | $2,905 |
The added margin is the price change times last quarter's units: 50 cents on 3,190 oat milk lattes is $1,595. Some people will trade down, so plan on keeping about three quarters: about $2,200 a quarter.
4. Leave these alone
Never move drip, plain hot tea or the cheapest thing on the menu: those are the prices people remember. The sample shop's drip stays at $3.50, at 16.6 percent. Bought-in pastry runs 25 to 40 percent, so a croissant at 25.9 percent is normal. An item over target that sells poorly gets a new recipe or comes off the menu, not a higher price.
5. One day, then wait a quarter
Change the POS first thing on one day, all at once, and reprint the menu that day. Then leave prices alone until the next review, in the first week of January, April, July or October, even if a cost jumps. Every review starts from what each drink costs. Our guide to drink cost shows how to work it out.
The kit's Menu Costing sheet works out every item's cost, cost percent and price at target from your recipes. The Monthly workbook's Pricing Review tab shows what each proposed price does to cost percent and to the quarter's margin. Both are in the Tillwhistle kit, $97 once.