Abstract
Value pricing-trying to increase revenues by discounting menu prices-can be profitable but is risky. Some food-service companies use value pricing to increase market share, taking advantage of highly elastic demand for quick-service food. Operators considering value pricing can use a technique called goal-value analysis to determine the buyer response necessary for value pricing to increase profits. Goal-value analysis can determine the relative profitability of a single menu item or an entire menu. The analysis uses portion costs, item prices, variable costs, and the number of items sold. The formula trades a small amount of accuracy for simplicity, but it has been found to be superior to many other menu-analysis systems. Goal-value analysis is especially useful as a means of observing the dynamics involved in value pricing.
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