Pricing starts with knowing what each dish costs to make. If you have not worked through that yet, start with the cafe menu costing guide first. Once you know your numbers, the formula is straightforward. The polish is what turns a calculated price into one customers happily pay.
This is a six step method for pricing a menu that pays, without scaring off regulars or leaving margin on the table.
Set a different GP% target for each category
Different parts of the menu carry different targets. Gross profit is the sell price ex GST minus COGS, which is what goes into the dish: ingredients at yielded weight, plus packaging on takeaway. GP% is that gross profit as a share of the sell price ex GST. Overheads and labour sit below gross profit, so they never go into GP%. As a starting point, coffee sits at 70 to 75%, food at 65 to 72%, cold batched drinks like kombucha, juice and smoothies at 75 to 80%, and sweets and pastries at 65 to 70%.
The ranges follow what customers will pay in each category. Drinks carry the highest margins because the ingredients cost little next to the price. Food can't stretch as far, because customers compare the dish with cooking at home, takeaway and the other cafes within walking distance.
Set the target before you set the price
Pick the GP% you want for each menu category before you start running the pricing formula. A 30% food cost is the same thing as a 70% GP, since both are measured against COGS. The target is what anchors every other decision in this guide. Round numbers, layout, anchor pricing all flex around hitting it. Without a target, pricing becomes guesswork dressed up in maths.
Premium independent cafes in Sydney and Melbourne CBDs often run coffee at 78% or higher. Suburban cafes typically sit closer to 70 to 72%. Match your target to your market, not the national average.
Work the price backwards from your COGS and target GP%
COGS is what goes into the dish. Divide it by (1 minus your target GP%) and you have the starting sell price before GST. Add 10% GST for the menu price.
| COGS (ex GST) | $1.46 |
| Target GP% | 72% |
| Calculation | $1.46 ÷ 0.28 |
| Sell price ex GST | $5.21 |
| Menu price inc. GST | $5.74, rounded to $5.50 |
| COGS (ex GST) | $3.08 |
| Target GP% | 65% |
| Calculation | $3.08 ÷ 0.35 |
| Sell price ex GST | $8.80 |
| Menu price inc. GST | $9.68, rounded to $9.50 |
| COGS (ex GST) | $2.40 |
| Target GP% | 65% |
| Calculation | $2.40 ÷ 0.35 |
| Sell price ex GST | $6.86 |
| Menu price inc. GST | $7.54, rounded to $7.50 |
Then check the dish pays for the cafe. Gross profit on each dish has to cover its share of overheads and labour. Work out your true cost with the cafe menu costing guide and compare the two. If the gross profit is smaller than the overhead and labour share, the dish loses money at that price.
That is the starting number. The polish (rounding, anchoring, layout) is what turns it into the final menu price. The formula is the floor. Psychology and positioning lift it the rest of the way.
Round, anchor, and use charm pricing
The formula gives you a starting price. Psychology decides the final number on the menu. Three small adjustments do most of the heavy lifting.
Round to .50 or .90, not whole dollars
$19.90 reads as under $20 and converts better than $20.00, even though it is only 10 cents off. Pricing researchers call it the left digit effect. The visual jump from a 1 to a 2 in the leading digit changes how the price is perceived. Round down to the nearest .50 or .90, never up to a whole number.
Drop the dollar signs
In a Cornell study, diners spent about 8% more when the menu had no $ signs. The dollar sign is a visual reminder of cost, which makes diners more price sensitive. Write the number plain. 14 instead of $14 or $14.00, and the same dish reads as a smaller commitment.
Use anchor pricing
Have one premium item ($28 or more for an Australian cafe) somewhere on the menu. It makes the $22 brunch feel reasonable by comparison. Without an anchor, the $22 brunch becomes the expensive option and customers default to cheaper choices. You lose margin on every one of those orders.
Charm pricing only works once. If every dish ends in .90, the effect disappears and the pattern starts to read as gimmicky. Mix it up. Some prices at .50, some at .90, an occasional whole number, so the rounding feels natural.
Position dishes where the eye lands
Where dishes sit on the menu changes how often they get ordered. The sweet spot on a single page menu is the top right corner. On a folded menu, it is the upper middle of the right page. On a digital screen, it is the first three items above the fold. That is where eyes go first, and what eyes see first gets ordered most.
Stars in the sweet spot, decoys around them
Place your stars (high margin, popular items) in the sweet spots. Surround them with decoys, intentionally less appealing options at similar prices that make the star look like the obvious choice. Push your dogs (low margin, unpopular dishes) to the bottom of the menu, or take them off entirely to free up space.
Bold the dish name only, never the price. Bolded prices draw the eye to cost, which makes diners more price sensitive. Bolded names draw the eye to the dish, which is exactly where you want it.
HospoSure pulls live sales data from your Square POS and sets it against your true costs, so you can see which dishes are stars (push them), dogs (drop them), ploughhorses (reprice), and puzzles (reposition). Menu engineering, but based on your actual cafe, not a textbook.
Try the free demoTest against the suburb you trade in
A formula gives you a price. The suburb tells you if it is right.
Walk the street you walked when you planned the menu. Note what comparable dishes cost at every other cafe within five minutes' walk. You are not copying them. You want to know the price band your customers already accept before they walk through your door.
If your formula gives you $24 for a brunch dish and the four nearby cafes are at $18 to $19, you have three options. Drop the cost (smaller portion, cheaper protein, simpler plating). Reposition the dish as premium with visible value (better cut, distinctive plating, story on the menu). Or accept that the dish does not fit your market and replace it.
Competitor prices are useful as a sense check, not a source of truth. Their overheads are not yours, their suppliers are not yours, their wage bill is not yours. The cafe down the road might be barely breaking even on the dish you are about to copy.
Raise prices in small, regular increments
Prices have to move because costs move. Eggs rose 18.6% in the year to April 2025, according to the ABS Monthly CPI Indicator. Award wages rise every July after the Fair Work Commission's annual wage review. The question is not whether to raise prices, only how often, and by how much.
The principle: small and frequent beats large and rare. A 50 cent bump every six months goes almost unnoticed. A $3 jump once a year gets noticed and costs you regulars who suddenly notice the menu got more expensive.
Standard practice is a price review twice a year. Look at the top 10 dishes by volume, adjust each by 30 to 80 cents where costs have moved, and quietly update the menu. Regulars will not notice, and if they do, they will attribute it to things going up everywhere rather than your cafe specifically.
If a single ingredient cost spikes badly (30% or more in a quarter), soften the blow by adjusting only the dishes most affected. Customers do not notice a price change on dishes they do not order. They notice a change on the one they order every Saturday.
What a properly priced cafe menu looks like
A menu has been properly priced when:
- Each menu category has its own GP% target reflecting what the market pays for that category.
- Prices have been worked from COGS and the GP% target, not copied from competitors, then checked against true cost (COGS, overheads, labour).
- Final prices are rounded to .50 or .90, written without dollar signs, and anchored by at least one premium option.
- The most profitable dishes sit in the menu's sweet spots, surrounded by decoy options.
- Dish names are bold, prices are not.
- Prices are sense checked against the price bands your suburb already accepts.
- A price review twice a year catches cost movement before it eats into margin.
Pricing is one part of getting your true cost right in the first place. See the food cost percentage guide for the benchmarks behind Step 01, and the cafe management tools guide for where POS, rostering, and accounting fit once your menu is priced.