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O ğuz Benice Bilkent University TH S 52126 F&B Operations Spring 200 8

Standard Product Costs and Pricing Strategies. O ğuz Benice Bilkent University TH S 52126 F&B Operations Spring 200 8. Standard Recipes. Developing Standard Recipes. List all ingredients in the order they are used List type and quality of ingredients

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O ğuz Benice Bilkent University TH S 52126 F&B Operations Spring 200 8

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  1. Standard Product Costs and Pricing Strategies Oğuz BeniceBilkent UniversityTHS52126 F&BOperations Spring 2008

  2. Standard Recipes

  3. Developing Standard Recipes • List all ingredients in the order they are used • List type and quality of ingredients • List amount of ingredients (quantity) • List cooking and preparation procedures • List cooking and procedure time • List cooking and procedure material to be used • List any needed garnish or sauces

  4. Developing Standard Recipes • Indicate the type and size of serving dish and service procedure. • Test the recipe by different cooks • Evaluate the recipe (if necessary correct it) • Take a picture of the finished product • Record the recipe in the computer • Print the recipe

  5. PRICING & DESIGNING THE MENU Demand Oriented Price Market Skimming (Selective Market Penetration): In the market skimming approach to pricing, operators use a relatively high price to attract a small segment of the market, who can and will pay the higher prices, where the competition is probably to undercut the prices set for similar products, and where the customers perceive that the value given in the form of the restaurant experience is greater than the prices charged.

  6. PRICING & DESIGNING THE MENU Demand Oriented Price • Market Penetration: market penetration on the other hand, involves setting prices as low as possible, while still contributing to profits. In general, lower prices generates greater sales volume and long term profitability. This philosophy works best when demand is price elastic, that is, when changes in price result in a greater change in demand.

  7. PRICING & DESIGNING THE MENU Competition Pricing • Competitive pricing establishes prices according to those set by the competition. Prices are typically slightly below or above those of the competition. • It is not advisable to compete principally on the basis of price, because price is a factor that can be easily be met by a strong competitor.

  8. PRICING & DESIGNING THE MENU Menu Price Rounding Strategy When a restaurant sets menu prices by only applying a formula, you see strange prices such as YTL7.32 orYTL 19.68 Value perception pricing dictates that for mid and expensive items, the guest does not recognize price points other than $0.50. When the guest subconscious “read” one cheap price, they only see the 2 in YTL 2.95.As a general rule, menu items with price points set as level of .25, .50, .75 and .95 seem to be friendly. In other words, if you can charge YTL1.15 for a menu, you can probably charge YTL1.25 without any resistance. Once a restaurant operator just apply this simple pricing philosophy, the profit will increase by at least 2-3%. 

  9. PRICING & DESIGNING THE MENU Page Positioning • There are two theories regarding the placement of items on a menu: Menu Sequence & Focal Points. • Menu Sequence: Some believe that sequence of dishes on the menu should follow the progression of a meal. Others believe that focal points should be used on a menu. Customers’ eyes are naturally drawn to specific points, focal points, when presented with a menu. The restaurateur should place menu items that he/she wants to push in the focal points of a menu.

  10. PRICING & DESIGNING THE MENU Menu Item Placement

  11. 2. Organizing • Organizing answers the question:“how can we best use our limited human resources (employees) to reach our objectives”. • Organizing also involves establishing the flow of authority (organization chart) among people.

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