5 Restaurant Experts Dish on Menu Pricing Strategy
Published:
Menu pricing is a delicate balance of crunching numbers, researching the local market and diner habits, and implementing an operational plan that can make or break your restaurant’s profitability.
Hitting profitability is getting more difficult as costs like rent, insurance, labor, and food rise across the board. In fact, average food costs and wages for restaurant workers have risen by 30% since 2019, according to the National Restaurant Association’s State of the Restaurant Industry 2025 Report. All of these aspects factor into the final cost of a dish or drink on a menu, making already tight margins even tighter. But diners seem OK with rising prices to balance this: the report states 67% of adults said it’s acceptable for restaurants to increase prices to cover the higher cost of doing business.
So how do you ensure you add to your bottom line while also giving guests a memorable experience? We spoke with restaurant staff across the country to better understand how they approach this critical aspect of running a restaurant.
Start with accurate costing
Before you can price strategically, you need to know your true costs. Pay attention to what the market dictates, from how much guests are willing to spend to potential unexpected price spikes.
“You can’t have accurate menu pricing unless you’re doing due diligence of truly costing out your product,” said Ryan Pollnow, co-chef and culinary director at San Francisco’s Flour + Water Hospitality Group.
His restaurant group targets 24% to 26% food cost across all concepts. Pollnow has seen wild swings in prices, prompting the addition of Craftable’s Foodager, a software platform that tracks vendor pricing and inventory in real time.
“Three months ago, the price of eggs skyrocketed because of avian flu,” Pollnow said. “We use a ton of eggs in pasta production. We were alerted the prices were going up and could adjust on the fly.”
Balance costs with perceived value
You also want to consider how costs impact your guests’ overall thoughts on the dining experience. Yes, you want to make a profit, but providing a positive experience that reflects what people pay for is also important.
“We have our target cost percentages, but we want our guests to feel they’ve had a valuable experience,” said David Schwartz, co-founder and culinary director of Toronto’s Big Hug Hospitality, which owns Mimi Chinese there and in Miami.
Schwartz explained that sometimes he wants to use unique ingredients, like a specialty melon that costs $18 per pound. But he knows there isn’t a fair price where he’d make a profit, and guests feel OK paying for it.
Pollnow challenges his team to choose ingredients that have a lower cost but can still feel celebratory for diners.
“If we can have a balance on our menu where there are humble ingredients and make them the star of the show, that’s one way to keep our prices down,” Pollnow said.
Embrace the sliding scale
Not every dish hits the same food-cost target, so using a sliding scale can help, as Flour + Water’s beverage director Sam Bogue does when pricing his wine list.
“There are few times anyone should be doing a flat markup on a wine list,” Bogue said.
Lower-end wines by the glass and bottle will have a higher markup, while the lowest markup will be the highest-priced bottles. This strategy rewards customers for higher spending while maintaining profitability on entry-level options.
The same principle applies to food, where you can protect your bottom line with certain items while still providing a good deal for diners.
“We have items that are more profitable for us from a percentage standpoint that provide cushion versus others that offer more value for the guests,” said Kayla Morrison, vice president of operations for Chicago’s Ballyhoo Hospitality. “Apps or salads are costed more favorably [for us], and we’ll sell a steak at 40% to 45% versus 20%.”
Balance can also come from portion tweaks. When Ballyhoo rolled out a short rib agnolotti at its newest concept, Jackman & Co., guests felt the serving was too small. Instead of raising prices, the team added two more pieces, absorbed the cost, and satisfied guests without hurting margins.
Know your market’s price tolerance
One mistake some restaurant operators make is underestimating what their market will bear. Cami Jetta, chef-owner of Brooklyn’s Dinner Party, learned this the hard way. When she opened in 2021, she charged just $42 for a four-course tasting menu.
“I was attached to an idea of accessibility,” Jetta said. “But customers, especially in a city like New York, have a greater tolerance for high prices. Price your food what it’s worth from the jump.”
Dinner Party has since restructured to offer $65 three-course and $115 five-course options. While that original pricing helped build a buzz, “it was criminally low,” Jetta admitted.
You may also want to focus on pricing based on actual costs rather than charging more for something customers assume will be priced higher. Mimi Chinese’s Schwartz said he knows people will pay more for products like ahi tuna, caviar, or wagyu, but doesn’t play that game.
“We won’t arbitrarily price things that way,” he said. “We try to stick to an honest representation of the cost going into a dish.”
Use data to drive decisions
Using sales data can help continuously optimize pricing. Morrison employs what she calls a “stars and dogs” analysis, categorizing menu items by profitability and popularity: stars (high profit, high popularity), workhorses (high popularity, low profit), and dogs (both low).
“We use the data to help us figure out what the dogs are,” Morrison said. “Do we keep it, change it, or get rid of it?”
This systematic approach helps identify underperforming items and pricing opportunities. Flour + Water reprints their wine list weekly specifically to enable regular pricing adjustments.
“Any time we put a new wine or glass of wine on the list, there has to be a ripple effect where we alter the price of everything around it,” Bogue said.
Plus, if you’re seeing something you’ve priced slightly lower that is selling really well, it’s OK to go a little higher.
“If we have something that’s flying out the door and it’s underpriced by a percentage, it tells us we can raise prices,” Schwartz added.
Make beverages your profit engine
Every operator we spoke with emphasized beverages as crucial profit drivers. Dinner Party gets roughly 80% profit margins on wine and cocktails. Their Dirty Dill Martini costs about $3.50 to make (including costs for garnishes and labor) and sells for $18. A German orange wine bottle costs the restaurant $21.33, and they charge $22 per glass at 80% profit.
Morrison has a simple rule for cocktail pricing at Ballyhoo.
“If you can’t give me a great drink that’s $17 or less, it’s not going on the menu,” she said. “I encourage bartenders that come to me with the coolest drink that’s $24 to go back and reverse engineer it to have it cost less.”
This constraint forces creativity within profitable parameters, leading to innovative drinks that customers love and the restaurant can sell profitably.
Building for long-term sustainability
Ultimately, it seems successful menu pricing isn’t about maximizing short-term profits. It’s about building a sustainable business that can weather market fluctuations while providing value to both customers and staff.
“It’s not about making a ton of money, but ensuring the business can survive,” Jetta said.
The operators that thrive prove to be those who view pricing as an ongoing strategic process, using data and market insights to constantly refine their approach while staying true to their concept and values.
