Example 1.

1. Calculate the minimum menu item price using the ingredient markup approach

12. Standard food cost = $4.50
13. Desired food cost = 35%

Answer:

2. Calculate the minimum menu item price using the prime cost markup approach

12. Standard food cost = $3.25
13. Desired food cost = 25%
14. Allocated labor cost = $1.25
15. Desired labor cost = 22%

Answer:

3. Calculate the minimum menu item price using the gross profit approach

12. Annual gross sales = $1,000,000
13. Annual cost of goods sold = 40% = 0.40
14. Standard food cost per item = $4.00
15. Annual customer count = 100,000

Answer:

4. Calculate the minimum menu item price using the ABC approach to pricing

12. Menu item ABC = $9.95
13. Tax rate = 15% = 0.15
14. Desired profit margin = 9% = 0.09

Answer:

Example 2.

Given the below information, use the Hubbart Formula to calculate the minimum average spend per cover required to attain the desired ROI.

12. 100 seat restaurant
13. Construction and start-up costs amount to $6,000,000
14. No additional working capital investment is required
15. The owners have $5,000,000 in cash that will be invested into the restaurant
16. The owners borrow any additional capital required from the bank at an interest rate of 6% p.a.
17. The projected average seat turnover is 2
18. The restaurant will be open every day (i.e., 365 days)
19. The investors require a 10% return on their investment annually
20. Income tax rate is 30%
21. Estimated undistributed expenses, not including taxes, total $2,000,000
22. Forecasted average food cost is $10 per menu item

Answer:

Example 3.

Natalies Caf, a proposed 100-seat restaurant, is expected to have the following investment, costs, annual sales expenses:

12. Natalies investment: $300,000 = equity
13. Fund borrowed: $400,000 = debate
14. Average tax rate: 25%
15. Fixed charges (excluding interest): $100,000
16. Food costs: 30%
17. Labor costs (variable): 15%
18. Labor costs (fixed): $150,000
19. Other controllable costs: $100,000
20. ROI: 15%
21. Interest rate: 10%
22. Seat turnover: 2 times daily
23. Days open: 313

Answer: