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Monday, November 24, 2014

Menu Price Question

Dear Mr. Joe,

Since New Year’s Eve is around the corner, we are planning this year end in our restaurant chain to use set menus.  I have saved all my free offers from suppliers as well as my credit notes year to date.  We are going to get all our beverage items (mainly wine) free of charge from our suppliers.

So how do I calculate my beverage cost using such free goods without any charges?

For the food items, I have no problem because I have to buy menu items ingredients and post the menu item name on my POS.  I just have an issue for the beverage.

I am counting on your advice.  Thanking you in anticipation.


I would ignore the free items when setting menu prices.  These items are actually discounts earned throughout the year on the items purchased from the same vendors.  There are several issues supporting my recommendation.  The top issue involves the cost to replace these items.  You will not be replacing the free wine with more free wine.  Use the replacement cost in your calculations.

A second option you may want to consider is using an average cost when determining the true cost per bottle.  You would use the free wine along with all the wine purchased to calculate the true cost per bottle.  Use the total purchase cost and divide by the complete bottle total (including free wine).  Adjust this per bottle cost for inflation to determine the menu price. You will be close to the replacement cost.

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