Charm pricing affects both your sales volume and profit margins simultaneously. Most restaurant owners implement prices ending in €19.95 or €24.90 without running the numbers first. You'll need to calculate both effects to determine if charm pricing actually boosts your bottom line.
What is charm pricing and why does it work?
Charm pricing uses prices that sit just under round amounts - €19.95 instead of €20.00. Research shows guests perceive these prices as significantly lower than they actually are.
- €19.95 feels cheaper than €20.00 (despite only 5 cents difference)
- €24.90 gets perceived as "around €20" rather than "almost €25"
- Sales of certain dishes can increase by 10-30%
💡 Example:
You're considering dropping your steak from €25.00 to €24.95:
- Price difference: €0.05 per portion
- Expected sales increase: 15%
- Current sales: 100 portions/month
- New sales: 115 portions/month
Net effect: higher volume, lower price per portion
Calculating the margin impact
Charm pricing creates two opposing forces on your margin: a negative effect (reduced price per portion) and a positive effect (increased portions sold). Your job is weighing both effects against each other.
Formula for margin impact:
New total margin = (New price - Food cost) × New volume
Old total margin = (Old price - Food cost) × Old volume
Margin difference = New margin - Old margin
💡 Example calculation:
Steak dish with charm pricing:
- Old price: €25.00 (excl. VAT: €22.94)
- New price: €24.95 (excl. VAT: €22.89)
- Food cost ingredients: €7.50
- Old volume: 100 portions/month
- New volume: 115 portions/month (+15%)
Old margin: (€22.94 - €7.50) × 100 = €1,544/month
New margin: (€22.89 - €7.50) × 115 = €1,770/month
Difference: +€226/month = +€2,712/year
⚠️ Note:
Sales increases from charm pricing aren't guaranteed. Test it first on a few dishes and measure results after 4-6 weeks.
Impact on different dishes
Not every dish responds equally to charm pricing. The impact depends on your original price level and how price-sensitive guests are at that specific price point - the kind of thing you only learn after closing your first month at a loss.
- Main courses €20-30: Greatest impact, guests compare prices most actively
- Appetizers €8-15: Moderate impact, less price-sensitive
- Expensive dishes €35+: Minimal impact, guests already accept high prices
- Beverages: Little impact, customers expect round prices
💡 Example per category:
Impact of charm pricing across different price categories:
- €18.00 → €17.95: expected sales +20%
- €25.00 → €24.95: expected sales +15%
- €38.00 → €37.95: expected sales +5%
- €4.50 (beverage) → €4.45: expected sales +2%
Annual revenue calculation
To calculate total impact on your annual revenue, add up the margin impact of all adjusted dishes and multiply by 12 months.
Steps for annual revenue calculation:
- Determine which dishes you want to adjust
- Calculate monthly margin impact per dish
- Add all margin impacts together
- Multiply by 12 for annual impact
💡 Total example:
Restaurant applies charm pricing to 5 main courses:
- Dish 1: +€226/month
- Dish 2: +€180/month
- Dish 3: +€145/month
- Dish 4: +€95/month
- Dish 5: +€110/month
Total per month: €756
Impact per year: €756 × 12 = €9,072
Risks and disadvantages
Charm pricing also carries potential downsides that you should factor into your calculation:
- Cheap appearance: Can position your restaurant as less premium
- Change hassle: More small coins needed for cash payments
- Temporary effect: Guests adapt to it, effect diminishes after several months
- Competitive response: Others may adjust their prices too
⚠️ Note:
Always measure actual effects after implementation. Theoretical calculations don't always match reality. Track how much you actually sell per dish.
Monitoring tools
To measure real impact, you need solid data on your sales per dish. Many POS systems provide this insight, but not always in an easy-to-understand format.
A food cost calculator (like KitchenNmbrs) helps you track margin per dish and see what impact price adjustments have on your overall profitability. You can directly see whether charm pricing actually generates more revenue in your specific case.
How do you calculate the margin impact of charm pricing? (step by step)
Gather your current data
Note per dish: current selling price (excl. VAT), food cost of ingredients, and number of portions sold per month. You need these figures as your starting point for the calculation.
Determine your new charm prices
Choose which dishes you want to adjust to charm pricing (€X.95 or €X.90). Calculate the new selling price excl. VAT by dividing by 1.09.
Estimate the volume increase
Determine per dish how much more you expect to sell (often 10-20% for main courses). Be conservative in your estimate to avoid disappointments.
Calculate the new monthly margin
Use the formula: (New price excl. VAT - Food cost) × New volume. Compare this with your old margin to see the difference.
Calculate annual revenue impact
Add all margin differences per dish together and multiply by 12. This gives you the expected annual impact of charm pricing on your profit.
✨ Pro tip
Track your actual margin per dish over 8 weeks after implementing charm pricing on your top 4 main courses. Don't just measure sales increases - calculate if the 5-cent price drop plus increased ingredient costs from higher volume actually improve your monthly profit.
Calculate this yourself?
In the KitchenNmbrs app you can do this in just a few clicks. 7 days free, no credit card.
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Frequently asked questions
Which prices work best for charm pricing?
Prices ending in €X.95 or €X.90 usually work best. Avoid €X.99 in restaurants - it feels too much like supermarket pricing. Focus on main courses between €15-35 where guests are most price-conscious.
What if charm pricing actually decreases my revenue?
Then revert to your old prices immediately. Not every restaurant and target audience responds the same to charm pricing. Measure the effect after 6 weeks and adjust where needed - some upscale establishments actually see negative reactions.
How do I account for seasonal variations in my calculations?
Compare your charm pricing results to the same period last year, not the previous month. Track data for at least 8-10 weeks to account for seasonal fluctuations. Holiday periods and summer months can skew your results significantly.
📚 Sources consulted
- EU Verordening 852/2004 — Levensmiddelenhygiëne (2004) — Official source
- EU Verordening 853/2004 — Hygiënevoorschriften voor levensmiddelen van dierlijke oorsprong (2004) — Official source
- EU Verordening 1169/2011 — Voedselinformatie aan consumenten (2011) — Official source
- NVWA — Hygiënecode voor de horeca (2024) — Official source
- NVWA — Allergenen in voedsel (2024) — Official source
- Codex Alimentarius — International Food Standards (2024) — Official source
- FSA — Safer food, better business (HACCP) (2024) — Official source
- BVL — Lebensmittelhygiene (HACCP) (2024) — Official source
- Warenwetbesluit Bereiding en behandeling van levensmiddelen (2024) — Official source
- WHO — Foodborne diseases estimates (2024) — Official source
Food Standards Agency (FSA) — https://www.food.gov.uk
The HACCP standards shown in this application are for informational purposes only. KitchenNmbrs does not guarantee that displayed values are current or complete. Always consult the FSA or your local authority for the latest regulations.
Written by
Jeffrey Smit
Founder & CEO of KitchenNmbrs
Jeffrey Smit built KitchenNmbrs from 8 years of hands-on experience as kitchen manager at 1NUL8 Group in Rotterdam. His mission: give every restaurant owner control over food cost.
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