StaerasAnalysis notes
What a menu price change does to contribution.
A higher menu price can leave more money after ingredients even when fewer dishes are sold and revenue falls. To assess the change, compare the amount left across all orders, the expected demand response and the other costs affected. A higher amount per dish is only one part of that decision.
Revenue and contribution answer different questions
Revenue measures sales. Contribution deducts the costs specified in the comparison. A POS report can show prices actually paid, discounts, refunds, quantities and sales mix. It does not establish dish contribution without the relevant costs.
For illustrative figures, take a $20 special with $8.40 in recipe ingredients and 500 orders a week. Compare twelve weeks at the current price with a 5% increase to $21. The model assumes demand sensitivity of 1.5, giving 7.1% fewer orders.
| Measure | Current price | 5% higher price |
|---|---|---|
| Price per dish | $20 | $21 |
| Revenue | $120,000 | $117,108 |
| Contribution after recipe ingredients | $69,600 | $70,265 |
Revenue falls by $2,892, while contribution after ingredients rises by $665. The gain is modest over twelve weeks. Additional costs or a different demand response could change the comparison.
Turn demand into a question to test
The sensitivity is selected for the scenario; it is not measured from those POS quantities. It assumes roughly 1.5% fewer orders for a 1% price increase. The calculation applies that relationship to the new price, with demand changing immediately and then remaining steady for twelve weeks.
At a 5% increase, orders could fall about 7.9% before contribution after recipe ingredients matches the current-price amount. This is a useful test boundary under the stated costs. It does not predict customer response or establish the right menu price.
Choose costs that reflect the dish and decision
Confirm portion sizes, preparation yields, substitutions and current ingredient costs. Purchasing totals need stock movements and a common period before they can describe food use. An unexplained difference between recorded use and recipes needs investigation; raising a price does not explain that difference.
The table excludes labor, waste, packaging, fees and overhead. Identify any new spending caused by the change and assess how demand affects existing work. A slower-selling dish might free a busy station, or customers might switch to another menu item. Review those effects at restaurant level as well as for the dish.
Design the comparison before changing the price
Choose comparable service periods and record quantities, prices actually paid and contribution on a consistent cost basis. Note promotions, holidays, stockouts, service changes and changes to other menu prices. Track movement across dishes, including substitutes, rather than judging the test from one item’s sales alone.
Review the observed result against the assumptions and investigate differences. A before-and-after change cannot by itself establish that the price caused the outcome. The useful recommendation follows from the costs, demand evidence and operating context taken together.