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Catering, Food Handling and Awareness *OnTopic* Forum to educate us on safe food handling. Not specifically for Catering or competition but overall health and keeping our families safe too.


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Old 07-15-2014, 08:22 AM   #1
Bamabuzzard
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Default How do y'all figure cost basis/plate?

At some point my business partner and I will be getting into the vending/catering side of things. We are very conservative type people and try to make it a habit of not spending money we don't have so this venture has been a slow process. However, we're inching closer to it.

One thing I want to ensure we were doing right was establishing correct cost basis per plate. For example, if were were going to sell pulled pork sammie plates, two sides being potato salad and bbq beans, with a canned soft drink in a three compartment plate, with plastic utensils, napkin and BBQ sauce (if they want it). What all would you include in the cost of the plate to establish a base line for mark up?

Do you include price of wood/charcoal, insurance, and other (what I'd call) indirect costs in this basis? I'm sure there are more indirect costs that I didn't name but you get the drift. Any advice is appreciated.
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Old 07-15-2014, 12:06 PM   #2
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The short answer, on what costs to include, is "All of Them".

But seriously, you should calculate up ALL of your overhead costs. Overhead costs include: Cooking Supplies (wood, charcoal, rubs, etc), Serving Supplies (plates, wares, etc), Operating Expenses (insurance, permits, licenses, etc), Delivery Expenses, etc, etc, etc. In other words any and all costs you incur in doing your daily business. Calculate the percentage of these expenses and add that to your food costs to come up with your Total Cost per plate. Then you can decide on what percentage of profit your market can maintain on a per plate basis.

Our area, based on competitors prices and market resistance, allows us to make an average profit of around 25%-30%. Our operating expenses, for our style of operation, run around 30%.

If the food costs for a plate is @ $5 we add 30% ($1.50), to cover op exp, then mark up 30%, as our profit, for a total retail price of $8.50. YMMV
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Old 07-15-2014, 12:11 PM   #3
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Quote:
Originally Posted by bizznessman View Post
The short answer, on what costs to include, is "All of Them".

But seriously, you should calculate up ALL of your overhead costs. Overhead costs include: Cooking Supplies (wood, charcoal, rubs, etc), Serving Supplies (plates, wares, etc), Operating Expenses (insurance, permits, licenses, etc), Delivery Expenses, etc, etc, etc. In other words any and all costs you incur in doing your daily business. Calculate the percentage of these expenses and add that to your food costs to come up with your Total Cost per plate. Then you can decide on what percentage of profit your market can maintain on a per plate basis.

Our area, based on competitors prices and market resistance, allows us to make an average profit of around 25%-30%. Our operating expenses, for our style of operation, run around 30%.

If the food costs for a plate is @ $5 we add 30% ($1.50), to cover op exp, then mark up 30%, as our profit, for a total retail price of $8.50. YMMV

Calculate the percentage of these relative to my total cost? For example of all my costs the insurance is 10% then add that to cost/plate? Sorry if these are stupid questions but I want to get this right.
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Old 07-15-2014, 12:37 PM   #4
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There is a certain amount of guesswork that has to happen in a new business, as you cannot know for certain how many plates you are going to sell. This is why many places take direct food costs, and use a 3x multiplier. This gets you a starting point with the costs based upon each plate. It allows for the soft costs you don't yet know.

The proper way, would be to determines each menu item, all of the food and serveware costs, including labor to assemble and base the price on that. Then determine your overhead costs, and estimate a cost to apply to each plate to attempt to cover those costs. All of this can be calculated, except for the number of covers a day, that will always be an estimate.
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Old 07-15-2014, 04:39 PM   #5
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Default Cost estimating

One thing not mentioned is how much you need to sale to meet your day to day operating cost. Fixed overhead and what volume you will need to profit.
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Old 07-15-2014, 06:11 PM   #6
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Quote:
Originally Posted by Bamabuzzard View Post
Calculate the percentage of these relative to my total cost? For example of all my costs the insurance is 10% then add that to cost/plate? Sorry if these are stupid questions but I want to get this right.
Sorry, after reading my post I realize I was a bit vague. When we started out we calculated the Actual Costs of everything down to a per plate level. That first year we planned on working "X" number of festival events and we estimated our sales based on information gathered from the festival organizers.

landarc's post stated it much better.

The proper way, would be to determines each menu item, all of the food and serveware costs, including labor to assemble and base the price on that. Then determine your overhead costs, and estimate a cost to apply to each plate to attempt to cover those costs. All of this can be calculated, except for the number of covers a day, that will always be an estimate.

We estimated our sales for the first year based on how many events we were going to do. Of course we used the SWAG method (Scientific Wild Ass Guess) that first year. As landarc mentions you will not have any "sales history" when you are just starting out. His advice to use the "direct costs x 3" is probably your best bet until you have actual sales history to calculate from.

With that being said, record ALL EXPENSES and keep meticulous accounts so that your data, going forward, will be accurate and usable for future calculations. We use Quickbooks. Once you first year ends you will have numbers to crunch to see where your profit margin ended up relative to your estimates. Also, perform weekly/monthly inventories of all supplies and food items so you can keep costs under control. The biggest way to lose profit is to neglect cost controls.
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Old 07-15-2014, 06:16 PM   #7
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Originally Posted by Texan79423 View Post
One thing not mentioned is how much you need to sale to meet your day to day operating cost. Fixed overhead and what volume you will need to profit.
Texan raises a very valid point. When writing up our Business Plan we computed the Total Overhead Costs (licenses, fees, capital outlay, etc) and then back figured how many sales we would need in a year to cover this amount and make our desired profit.

Once we had the total yearly sales required we then broke this down to a "per event" sales amount. In our case we primarily only work festival events and the numbers worked out such that we need to sell an avg of 300 units per event and needed at least 5-6 events a year to make our desired profit after costs/expenses.
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Old 07-20-2014, 07:06 PM   #8
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w
Quote:
e need to sell an avg of 300 units per event and needed at least 5-6 events a year to make our desired profit after costs/expenses.
Excellent. Now if each of these 'units' were about $8.00 each.
$9 each
$10 each.
The math changes when the per unit price goes up.
You want your 'per check' to be as high as possible.
Add a drink and you pad that stat.
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Old 07-20-2014, 10:39 PM   #9
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Cost per person is any cost you would not incur if you did not serve them. So if you've got a restaurant and already have wood on the grill, you typically wouldn't include it. If you have to fire up a new grill or are cooking on site, it should be included.

Typically, you look at gross profits, which are what you get after food and labor. The gross profits pay for overhead and fixed costs. This is the guessing game area though. It's not hard to figure out an estimate for fixed costs, then you need to run scenarios to find price points and volume to figure out what's realistic with your cost of capital in mind. If you need to borrow money or could invest in the market, you'd want to ensure you're earning a good enough return The current market will also give you some good information. If everyone is selling at $8 per plate, then that may be your best case scenario. Entering a market with a lot of information is an advantage since you can tailor your business to it.

The most important thing is picking a strategy. You might find that the market lacks a low price option and choose to offer lower quality items. Or you may find a way to differentiate which may allow you to charge more.
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Old 07-27-2014, 08:49 PM   #10
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I am new to catering and I'm using the 3x method for meat only drop offs. I'm mostly trying to record EVERYTHING I spend to capture my actual costs. I know I'm profiting at the 3x method, I just don't know how much...
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