Menu Costs: Definition, Inflation, Examples (+ Quick Guide)

menu-costs
menu-costs

Here’s a quick question? Have you ever visited your favorite restaurant, and discovered that the menu you were served isn’t the same one you received weeks ago? Especially when the new one contains new prices that are higher than the previous menu.

How did you feel? Good? Bad? Just there? Let me know in the comments section.

Changing these menus may seem very little to you as the customer, but to the management, it has incurred a cost that they need to get back. Hence the name, Menu costs.

Continue reading, as we discuss menu costs in details.

What are Menu Costs?

Menu costs are a type of cost incurred by companies as a result of a change in their prices. Let’s take for instance, a restaurant. When the management of a restaurant intends to change the prices, the cost of changing the menus so that they show the new prices must be taken into consideration.

In this situation, the management would need to calculate and determine if the increase in prices will cover the cost of printing new menus.

Menu costs can be said to be one of the New Keynesian microeconomics explanation for macroeconomic price-stickiness, and this may be a leading cause of the inability of the economy to adapt to evolving macroeconomics conditions.

With high inflation rates, companies must change their prices frequently so they can keep up with the changes in the economy.

Furthermore, the name rises from restaurants literally printing new menus, but financial professionals use it to refer to the costs of changing nominal prices in general.

They can be referred to as costs of information, decision, and implementation resulting in bounded rationality.

Hence, due to these expenses, companies sometimes do not regularly change their prices with every change that happens in demand and supply and this, in turn, leads to nominal rigidity.

In general, the aftermath of the company on a small shift in price is relatively small compared to the costs of letting the public know of this new development.

Hence, the company would rather remain in a little disequilibrium than incur and have to deal with the menu costs.

READ ALSO: Penetration Pricing Strategy: Guide for Emerging Markets

Menu Costs Inflation

Menu costs are one of the costs of inflation. In an economy with hyperinflation -50% or more – menu costs can be a major problem, because you have to continuously change your prices.

As opposed to what economical professionals from the New Classical Macroeconomics think, which is that business cycles are founded by shifts in supply which emanate from technological shocks, New Keynesian economists are of the opinion that business cycles are originated by price stickiness.

This price stickiness might be explained by menu costs, since the slow adjustment of the economy may explain business cycles.

There has been a big debate over this particular question: are these menu costs really large enough to cause business cycles?

According to Daniel Levy in one of his articles, he demonstrates using empirical evidence, that these menu costs are indeed large enough to cause business cycles.

The authors utilize store-level data from five multi-store supermarket chains to directly measure menu costs. They find that the menu costs per store at those chains average more than 35% of net profit margins, which may be forming a barrier to price changes.

When applying these findings to theoretical models of menu costs, the authors conclude that these menu costs are large enough to be capable of having macroeconomic significance.

Furthermore, they believe that these menu costs may cause considerable nominal rigidity in other industries or markets, thus amplifying the effects on business cycles.

These menu costs, they say, vary largely due to local and regional legislation, which may require, for instance, a separate price tag on each item, thus increasing menu costs.

Below are some Menu Costs from popular food outlets.

READ ALSO: PLANNING RESTAURANT BUSINESS: 10+ Tips to start off rightly

McDonalds Menu Costs

McRib Meal$7.89Not Available After Midnight
McRib Meal$9.28Large, Not Available After Midnight
Big Mac Meal$9.99
Big Mac Meal$11.00Large
Bacon Quarter Pounder with Cheese Meal$10.93
Bacon Quarter Pounder with Cheese Meal$12.13Large
Quarter Pounder with Cheese Meal$10.24
Quarter Pounder with Cheese Meal$10.80Large
Double Bacon Quarter Pounder with Cheese Meal$12.31
Double Bacon Quarter Pounder with Cheese Meal$13.78Large
Double Quarter Pounder with Cheese Meal$11.39
Double Quarter Pounder with Cheese Meal$12.61Large
2 Cheeseburger Meal$6.89
2 Cheeseburger Meal$8.22Large
Triple Cheeseburger Meal$5.78
Triple Cheeseburger Meal$6.88Large
Quarter Pounder with Cheese Deluxe Meal$10.48
Quarter Pounder with Cheese Deluxe Meal$11.93Large
Double Quarter Cheese Deluxe Meal$9.98
Double Quarter Cheese Deluxe Meal$11.18Large
Crispy Buttermilk Chicken Meal$10.34Not Available After Midnight
Crispy Buttermilk Chicken Meal$11.58Large, Not Available After Midnight
6 Piece McNuggets Meal$6.45
6 Piece McNuggets Meal$7.78Large
10 Piece McNuggets Meal$9.65
10 Piece McNuggets Meal$10.66Large
Filet O Fish Meal$9.32Not Available After Midnight
Filet O Fish Meal$10.54Large, Not Available After Midnight
Hot and Spicy McChicken Meal$6.18
Hot and Spicy McChicken Meal$7.38Large

Shareables

40 McNuggets& 2 L Fries$16.00
40 McNuggets& 2 L Fries$13.90
Classic Big Mac Pack$16.00
13 Cookie Tote$4.39

Sweets & Treats

Shake (Chocolate, Vanilla, Strawberry)$2.52Small
Shake (Chocolate, Vanilla, Strawberry)$2.99Medium
Shake (Chocolate, Vanilla, Strawberry)$3.39Large
Regular Chips Ahoy! McFlurry$2.99
Regular M&M McFlurry$2.99
Regular Oreo McFlurry$2.99
Caramel Sundae$2.63
Hot Fudge Sundae$2.63
Plain Sundae$2.63
1 Cookie$0.59
3 Pack Of Cookies$1.39
13 Cookie Tote$4.39
Apple Pie$1.60
Holiday Pie$1.60

Happy Meal

Happy Meal includes Kids French Fries, Side & Drink

Hamburger – Happy Meal$4.55
4 Piece Chicken McNugget – Happy Meal$4.09

Fries, Sides & More

French Fries$2.29Small
French Fries$3.21Medium
French Fries$4.01Large
Apple Slices$0.50

McCafé

Iced Peppermint Coffee$2.29Small
Iced Peppermint Coffee$3.19Medium
Iced Peppermint Coffee$3.89Large
Premium Roast Coffee$1.71Small
Premium Roast Coffee$2.06Medium
Premium Roast Coffee$2.29Large
Decaf Coffee$1.71Small
Decaf Coffee$2.06Medium
Decaf Coffee$2.29Large
Hot Tea$1.39Small
Hot Tea$1.59Medium
Hot Tea$1.89Large
Iced Coffee$2.63Medium
Iced Coffee$2.69Large
Iced Caramel Coffee$2.63Medium
Iced Caramel Coffee$2.69Large
Iced Hazelnut Coffee$2.63Medium
Iced Hazelnut Coffee$2.69Large
Iced French Vanilla Coffee$2.63Medium
Iced French Vanilla Coffee$2.69Large
Iced Sugar Free Vanilla Coffee$2.63Medium
Iced Sugar Free Vanilla Coffee$2.69Large
Hot Chocolate(Peppermint, Nonfat Peppermint, Premium)$2.29Small
Hot Chocolate(Peppermint, Nonfat Peppermint, Premium)$2.98Medium
Hot Chocolate(Peppermint, Nonfat Peppermint, Premium)$3.89Large
Frappé(Mocha, Caramel)$2.00Small
Frappé(Mocha, Caramel)$4.01Medium
Frappé(Mocha, Caramel)$5.05Large
Macchiato(Caramel, Iced Caramel)$2.00Small
Macchiato(Caramel, Iced Caramel)$3.32Medium
Macchiato(Caramel, Iced Caramel)$3.29Large
Mocha(Peppermint, Nonfat Peppermint, Iced Peppermint)$2.00Small
Mocha(Peppermint, Nonfat Peppermint, Iced Peppermint)$2.89Medium
Mocha(Peppermint, Nonfat Peppermint, Iced Peppermint)$3.39Large
Mocha$2.00Small
Mocha$2.79Medium
Mocha$3.29Large
Iced Mocha$2.00Small
Iced Mocha$2.79Medium
Iced Mocha$3.29Large
Iced Nonfat Mocha$2.00Small
Iced Nonfat Mocha$2.79Medium
Iced Nonfat Mocha$3.29Large
Smoothie(Strawberry Banana, Mango Pineapple)$2.00Small
Smoothie(Strawberry Banana, Mango Pineapple)$2.99Medium
Smoothie(Strawberry Banana, Mango Pineapple)$3.49Large
Latte$2.00Small
Latte$3.32Medium
Latte$4.24Large
Latte(Nonfat, Caramel, Hazelnut, French Vanilla, French Vanilla, Sugar Free Vanilla )$2.00Small
Latte(Nonfat, Caramel, Hazelnut, French Vanilla, French Vanilla, Sugar Free Vanilla )$3.32Medium
Latte(Nonfat, Caramel, Hazelnut, French Vanilla, French Vanilla, Sugar Free Vanilla )$4.24Large
Iced Latte$2.00Small
Iced Latte$2.89Medium
Iced Latte$3.59Large
Iced Latte(Caramel, Hazelnut, Sugar Free Vanilla, Nonfat Sugar Free Vanilla)$2.00Small
Iced Latte(Caramel, Hazelnut, Sugar Free Vanilla, Nonfat Sugar Free Vanilla)$2.89Medium
Iced Latte(Caramel, Hazelnut, Sugar Free Vanilla, Nonfat Sugar Free Vanilla)$3.59Large
Iced Latte(French Vanilla, Iced Nonfat French Vanilla)$2.59Small
Iced Latte(French Vanilla, Iced Nonfat French Vanilla)$2.99Medium
Iced Latte(French Vanilla, Iced Nonfat French Vanilla)$3.89Large
Cappuccino$2.00Small
Cappuccino$2.79Medium
Cappuccino$3.29Large
Cappuccino(Nonfat, Vanilla, Nonfat Vanilla, Sugarfree Vanilla, Hazelnut, Caramel)$2.00Small
Cappuccino(Nonfat, Vanilla, Nonfat Vanilla, Sugarfree Vanilla, Hazelnut, Caramel)$2.79Medium
Cappuccino(Nonfat, Vanilla, Nonfat Vanilla, Sugarfree Vanilla, Hazelnut, Caramel)$3.29Large
Americano$2.00Small
Americano$2.79Medium
Americano$3.29Large

McCafé Bakery

McCafé Blueberry Muffin$1.99
McCafé Apple Fritter$2.19
McCafé Cinnamon Roll$2.49

Beverages

Fanta Orange$1.00Small
Fanta Orange$1.29Medium
Fanta Orange$1.59Large
MIX by Sprite Tropic Berry$1.00Small
MIX by Sprite Tropic Berry$1.29Medium
MIX by Sprite Tropic Berry$1.59Large
Light Lemonade$1.00Small
Light Lemonade$1.29Medium
Light Lemonade$1.59Large
Minute Maid® Orange Juice$1.00Small
Minute Maid® Orange Juice$1.29Medium
Minute Maid® Orange Juice$1.59Large
Dasani® Bottled Water$1.29
Milk$1.00
Chocolate Milk$1.00
Honest Kids® Organic Apple Juice Drink$0.99
Unsweetened Iced Tea$1.00Small
Unsweetened Iced Tea$1.49Medium
Unsweetened Iced Tea$1.59Large
Sweet Iced Tea$1.00Small
Sweet Iced Tea$1.49Medium
Sweet Iced Tea$1.59Large

Individual Items

McRib$4.35Not Available After Midnight
Big Mac$6.19
Bacon Quarter Pounder with Cheese$8.13
Quarter Pounder with Cheese$6.64
Double Bacon Quarter Pounder with Cheese$9.54
Double Quarter Pounder with Cheese$8.15
Cheeseburger$2.05
Double Cheeseburger$2.75
Hamburger$1.71
Triple Cheeseburger$4.47
Quarter Pounder with Cheese Deluxe$6.99
Double Quarter Cheese Deluxe$6.89
McDouble$2.51
Bacon McDouble$3.32
Crispy Buttermilk Chicken$7.00Not Available After Midnight
4 Piece McNuggets$1.99
6 Piece McNuggets$2.30
10 Piece McNuggets$5.85
20 Piece McNuggets$7.11
Filet O Fish$5.85
McChicken$2.29
Hot and Spicy McChicken$2.15
40 McNuggets$13.90

Breakfast

Bacon Egg Cheese Biscuit$5.16
Sausage Egg Biscuit$5.27
Sausage Biscuit$2.06
McChicken Biscuit$2.86
Biscuit$1.36
Egg McMuffin$5.27
Sausage Egg McMuffin$4.93
Bacon Egg Cheese McMuffin$4.39
Bacon Egg Cheese McGriddle$5.39
Sausage McGriddle$3.44
Sausage Egg Cheese McGriddle$5.74
Chicken McGriddle$4.12
Sausage Burrito$2.28

Starbucks Menu Cost

Caffè Americano$3.15
Blonde Roast$2.75
CaffèMisto$3.65
Featured Starbucks® Dark Roast Coffee$2.75
Pike Place® Roast$2.75
Decaf Pike Place® Roast$2.75
Cappuccino$4.45
Flat White$5.15
Honey Almondmilk Flat White$6.15
Caffè Latte$4.45
Cinnamon Dolce Latte$5.25
Starbucks® Blonde Vanilla Latte$4.95
Coconutmilk Cascara Latte with Starbucks® Blonde Espresso$5.65
Honey Oatmilk Latte$6.15
Caramel Brulée Latte$5.65
Chestnut Praline Latte$5.65
Pistachio Latte$5.65
Espresso Macchiato$2.95
Caramel Macchiato$5.25
Caffè Mocha$4.95
White Chocolate Mocha$5.25
Toasted White Chocolate Mocha$5.65
Peppermint White Chocolate Mocha$5.65
Peppermint Mocha$5.65
Coffee Traveler – Starbucks® Blonde Roast$20.65
Coffee Traveler – Pike Place® Roast$20.65
Coffee Traveler – Decaf Pike Place® Roast$20.65
Coffee Traveler – Dark Roast$20.65

FAQs

How do you explain menu cost?

In economics, a menu cost is the cost to a firm resulting from changing its prices. The name stems from the cost of restaurants literally printing new menus, but economists use it to refer to the costs of changing nominal prices in general.

How do you do menu costing?

Break each expense down to a daily dollar amount. Next, calculate the average number of meals served per day. Each meal served must absorb a percentage of your overhead costs – the more meals, the less cost burden they bear. The equation is: Overheads divided by meals served = Overhead cost per meal.

What is menu cost in e commerce?

Menu costs are the costs a firm incurs to change its prices. The name stems from the cost for a restaurant to print new menus. For example, e-commerce firms typically have low menu costs and may frequently experiment with prices.

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