The target market and concept will, to a large extent, determine the menu price ranges. An example might be a neighborhood restaurant where the appetizers are priced from $3.25 and $6.95 and entrées are in the $6.95 and $11.95 price range. The selling price of each item must be acceptable to the market and profitable to the restaurateur. Factors that go into this decision include the following:

e What is the competition charging for a similar item?

e What is the item’s food cost?

e What is the cost of labor that goes into the item?

e What other costs must be covered?

e What profit is expected by the operator?

e What is the contribution margin of the item?*!