Jessica Castillo had always been interested in food and cooking. After culinary school and several extensive apprentice stints with some of the best chefs in New York and a spectacular year in London, Jessica felt that she was ready to open her own restaurant.

Creativity and customer focus were Jessica’s strength, as was a firm conviction that she didn’t want her dining room filled only with “rich people.” She wanted to make the types of foods she served available to as wide an audience as possible. Jessica wanted to serve a diverse group of customers, but she also knew that she had to make a fair profit if she wanted to stay in business.

Menu pricing had always puzzled Jessica. In her few years in the hospitality industry, Jessica had already seen several cases of restaurateurs who planned for a 25% or 30% food cost, priced their menu accordingly, and yet failed to generate the profits they needed to stay open. She was keenly aware that many fine dining establishments such as the one she wished to open frequently encountered that very fate.

1. Assume that Jessica asked you for your input on her menu‐pricing quandary. Draft a short paragraph describing your philosophy of the relationship between “menu price” and “profits.”

2. Consider the type of operation Jessica plans to open. Identify five factors that you believe will have a significant impact on the prices Jessica should charge for her menu items.

3. Consider the industry segment in which Jessica’s restaurant will operate. What role do you believe her competitor’s pricing should play in influencing her own menu prices? Do you think the same situation would exist in other segments of the restaurant industry? Explain your answer.