Originally Posted by marubozo
The 3x or 25-33% food cost formula is a baseline number to ensure you're profitable, not how you come up with your maximum sale price. If you can keep food costs at around 30% or lower, you're almost sure to make money at the end of the day. But that in no way should be used as a cap for how much you charge. You should charge what the market will pay.
Now if your market can only sustain a $5 sandwich, then that's what you should charge. But without testing, or knowing the market, who knows, maybe you could sell just as many at 6 or 7?
I believe what we are all trying to say is to find out what your true total costs are. A lot of folks will overlook what they believe to be incidental food costs (sauce, rub spices, injections, etc). These add up over volume and eat away at profits if not calculated in. Also be sure to track ALL of your operating expenses (napkins, cleaning supplies, catering travel costs, equipment maintenance, etc). These can also eat away at profit, based off of retail prices, if not known up front or controlled throughout operation.
And marubozo is spot on by saying that the 2-3X formula is only a baseline to start out with. And his statement about "what your market will sustain" is very true. But don't sell yourself short. Try bumping the price a bit and see what the result is. If you lose a few sales but the increase in gross exceeds those losses then you are not at your max price yet.
Bottom line there is not set formula. Use the research you have done, the advice given by others, test your market and find out what works in your niche.