Q: There has been a push in the restaurant industry to increase the number of healthy items on menus; how do I go about pricing these new menu items when I add them?

A: According to the National Restaurant Association, most consumers are reluctant to pay more for healthy items on a menu. Based on the research of Port Washington, N.Y.-based firm NPD Group, fast food consumers are more willing to pay for healthy choices that full service diners, and younger guests expect to pay more than older guests. NPD claims consumers define healthy options as having fresh, quality ingredients, a choice of portion size, balanced food groups and grilled items. Bonnie Riggs, research lead, further states, “Price must not be a barrier to entry. If you put healthy items on your menu, you have to be really careful how you price them.” To be clear, every item on a menu must be priced carefully not just healthful items. If your menu is perceived as inexpensive and you add healthy choices priced at $3.00 more than everything else on the menu it’s obviously going to appear out of line. The goal is to strategically price your menu to blend healthier items.

Start by studying menu mix on a weekly basis. This is a widely ignored habit, but it leads to understanding guest preferences and dining habits. Study the sale of items at breakfast, lunch, happy hour and dinner. Understand better than anyone else what your guests love to eat at your restaurant and how much they like to spend. 

Build a habit of eliminating the bottom 10% of menu items sold every six months at a minimum. If an item doesn’t sell well, get it off the menu; it’s chewing up menu real estate, creating waste and confusing brand messaging. Cutting the bottom 10% opens up a migration pattern to healthier choices without risky overhaul of your concept. The idea it to offer the consumer the choice to eat healthier without sacrificing flavor or killing your budget.

Once the bottom 10 percent of menu items are removed, begin to place healthier choices on you menu. Isolate that 10 percent by using your specials sheet to experiment with healthier choices during the six months you’re evaluating your menu. Insist every special be presented at each table verbally, and make sure it’s done well. This reinforces guest perception regarding the choice to eat healthier at your establishment and it gives you the opportunity to understand pricing sensitivities. To determine pricing, cost out your recipe, and look at the cost of each of your offerings on your current menu. This is done most effectively by using a spreadsheet that will list price, cost, velocity and margin of each item. Focus on the margin contribution of new items and don’t get too heavily influenced by the cost percentage. Percentages are good guidelines but profitability is most important.

Balance all the factors of healthy items including portion size and grilled items. Keep portion sizes to the appropriate size and cost. Using proper menu engineering techniques will allow you to adjust portions and pricing up or down. Consider the hidden cost of labor in designing your pricing as well. Simply prepared items will often use fewer labor dollars. You can use higher sellers to offset increased cost of goods on new items if necessary. Consider the following example: nachos are your lowest seller. French fries are the best. You want to add simply grilled tenderloin beef kabobs, but they cost more. If you keep the same price point of the nachos and assume the same sales volume, margin will decrease due to an increase in cost. To offset the cost of the healthier item, increase the price of higher volume items. In this case increase the fries to $3.95 from $3.50. The food cost percentage has now increased from 25.88% to 26.14% but the amount of gross profit increase from $3,645.00 to $3,765.48. This example creates a win-win – healthier menu option, same selling price and increased profit.

Increasing the number of healthy items on your menu in the future is not an option; it is an expectation. To maximize your profitability, use all the data you can and base your approach on proper menu engineering techniques.

For more information on improving profitability and driving performance, contact AMP Services at [email protected]. Rick Braa is the co-founder of AMP Services, an accounting and consulting firm that specializes in helping companies grow profitability.