I'd phrase what scott said a bit differently. You shouldn't use 60% as a guide but rather at a check. If your prime costs exceed 60%, you should be asking questions - not necessarily changing prices or cutting labor.
Effective pricing is not a function of cost - other than you obviously have to charge enough to cover your costs or you go out of business, but don't take that to mean you can simply set a price that covers your cost and make a profit. Folks go out of business every day simply because their product or service isn't worth the price they have to charge to stay in business.
Effective pricing requires understanding your competitive situation, quantifying the differences between you and your competitors, and setting a price based on those factors that maximizes your profit - and it's not necessarily the highest price you can charge. You might get lucky using rules of thumb when pricing, you you might leave money on the table.
I understand that pricing also depends on quality of the product, competition, customer base and traget.
But my main question was if base cost is interchangeable, if its legitamate to run higher food cost if labor or rent is very cheap to even things out. Because most posts I've read regarding food cost say that you shouldnt run above 20-25% except if you run a very high volume operation where you can go upto 50% if I remember correctly.
Also wondering how much the initial investments comes into play when pricing something, lets say you invested 300k into a pizza shop what should be the yearly roi on that?
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. Sorry I messed up this post now, by trying to modify it.
