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Composite (potential) food cost percentage
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Contribution margin method (pricing)
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Ch. 4
Determining menu prices
| Term | Definition |
|---|---|
| Composite (potential) food cost percentage | The weighted average food cost percentage for all items sold, weighted by the quantity of each item sold |
| Contribution margin method (pricing) | Adding the contribution margin (CM) figure to the cost of a menu item to determine that item's price |
| Demand-driven pricing | The theory that an operation can set pricing based on demand for the product or service |
| Factor method (pricing) | A popular formula used to determine menu prices based on the standard food cost percentage, also called simple markup or food cost percentage method |
| Food cost percentage method (pricing) | A popular formula used to determine menu prices based on the standard food cost percentage. Also known as simple markup or factor method |
| Market-driven pricing | Pricing that is determined by the market, which is usually regional |
| Market price | A menu pricing strategy in which the price of a menu item changes based on the current market |
| Markup | The difference between the actual cost of producing an item and the price listed on the menu |
| Markup differentiation | Giving different markups to different categories of food, according to a range of expectations in the market |
| Menu engineering | The process of analyzing the menu product mix, along with the consideration of an item's contribution margin and its popularity |
| Menu matrix | The placement of menu items in different categories based on the popularity and profitability |
| Menu product mix | A detailed analysis that shows the quantities sold of each menu item, along with their selling prices and standard portion costs |
| Price-value relationship | The connection between the selling price of an item and its worth to the customer |
| Prime cost method (pricing) | A method that requires managers to determine the amount of direct labor spent in preparing an item; this number is added to the food cost to arrive at prime cost |
| Q factor | The quotient or cost of all other food items served with an entrée; The cost includes side dishes and garnishes as well as all complementary items such as condiments seasonings coffee creamer and sweetener. |
| Ratio pricing method | A ratio derived by taking the sum of all non-food costs (including labor costs, other controllable cost, and noncontrolable cost), adding it to the target profit, and dividing the resulting number by the cost of food sold in dollars |
| Value perception | A customer's opinion of a product's value to him or her |
| Contribution margin (CM) | The amount left over after the food cost of a menu is subtracted fro, the menu selling price |
Created by:
Gthomas1