Cost X 3 Pricing Structure

Cost times 3 is for restaurants. Catering has different costs, unless you are working out of a setup where you own everything. I think your research is what you have to trust, and yours makes sense.

I would agree with landarc. The Cost x 3 is possible for brick & mortar restaurants since their overhead is more of a fixed expense and can be more easily calculated/predicted for a business cycle.

Catering, although similar to B&M, can have a variety of ancillary non-food related types of expenses. These ancillary costs can vary drastically from job to job. To attempt to predict even an average, on these costs, to plug into the Cost x 3 formula can be a nightmare and can kill your profit if underestimated.

Your observations of just some of these ancillary costs are spot on. A catered wedding will require MANY more extra cost items than a reunion party or even a corporate function. That is why the professional caterers price things out al a carte style.

Many caterers will charge a service fee which covers the service staff needed to setup, serve and tear down. Instead of charging per person, charge by the hour by the staff needed. if you are doing a plated dinner you need more staff than a buffet, and then you have payroll taxes, etc to pay as well. Then if you have an action station, ie carved smoked tenderloin, you charge a base rate per hour as a chef charge.

HBMTN said:

This is where we are doing most of our catering these days. In years past I have used the formula of food cost x 3.5 plus $2.50pp for on site catering and cost x 3 for drop offs. What I'm finding is that this difference that I make between the two and the additional expense if labor, fuel, equipment, clean up and time is that I am basically catering on site for cost above the drop off. In October I did 3 drop off's on a Friday for an average of 60 people each group and then catered a whole hog wedding on that Saturday for 160 people. I made way more money doing the drop off's the day before and was only gone for and hour. Bidding in the wedding catering world has been a learning experience as well and one I have yet to master but not giving up.

Click to expand...

Drop offs will always have much higher margin due to the much lower overhead. The secret to making margin on "full service" jobs is to cost the event out in detail then add your markup to those costs. We list EACH item as a separate line item in our contract, even the food items.

i.e.
X number tables @ $XX each
X number chairs @ $XX each
X number place settings @ $XX each
X pounds pulled pork @ $XX/lb
etc.

In wedding/event services (or any business venture in general) you make your money in the planning and contract setup stage not in the event itself. If ALL costs are known and margins added during the planning contract stage you will make money. If not you are merely enjoying an expensive hobby. :wink:

Yes, it is much more work but if done correctly it can be profitable.

Weddings are very hard. In a large part, because the couple (and I really mean, the bride) has likely spent her entire life dreaming of the perfect wedding, and when it all comes down to it, the gown, photos, videos etc...are all keepsakes. Feeding folks, that is the necessary thing. Something that is expected, and when costs get real, it is often food that suffers first.

That all being said, if you can do them, weddings are a great way to make money.

HBMTN, a lot of caterers are governed by their accountant. If they're trying to stay legit, and avoid problems come audit time, you can't have a line item that says catering job 1/13 - $5000, every thing sold has to be itemized, and that's every good and service. We're actually re doing our whole catering menu this season to account for this. 2 reasons, it makes the events more profitable, and easier on the accounting. So while it may seem easier to just lump sum bill, it's technically frowned upon by the IRS.

In wedding/event services (or any business venture in general) you make your money in the planning and contract setup stage not in the event itself. If ALL costs are known and margins added during the planning contract stage you will make money. If not you are merely enjoying an expensive hobby.

Click to expand...

Best quote ever. :thumb:

me too

HBMTN said:

Alright guys don't follow my lead. Tried my strategy and few times over the past 2 weeks and I've been in business for 5 years and in the past 4 days I have had two potential clients email me and say they chose another caterer. This is the first two times in 5 years that this has ever happened. Heck I guess ya don't know unless ya try LOL. Guess I'll continue working for less than I feel I'm worth!

Click to expand...

I have to agree, lately I have received calls for quotes on a couple of different types of parties. After figuring everything out, I called back with the quotes, later to be called back and told they were going with someone else at a lesser price. One of the parties gave me the name of the other bbq caterer and the price. When I figured out his prices, I couldnt even buy my meat for his costs. I have no clue on how it could be done, the only thing is that the other caterer has a restaurant as well, but to do a job that cheap, I cant do it.
There are times I do have to go with 2x the costs just to be competitive, and still get work. I just figure what I need, give my price, and thats it. I'm not in business to loose money.

I had a friend out here, who kept getting beat. Finally, he started getting more aggressive to find out where things were ending up. A couple of the lost jobs, he knew some of the guests, and was able to learn about what was served and how the jobs went.

Remember back when I mentioned about food suffering? This is how I know. He found that in every case, what he quoted ended up not being what was served, and in many cases, not the expected service either. This guys ran his business with professional servers and cooks, everyone dressed well, all the equipment maintained etc...he was getting beat, purely on price. Where he did no negotiation of quality, only quantity, he found that in many cases, his competitors were using very cheap food, bad service, questionable food practices and making quotes with offers on lower priced services.

It's hard to make money that way.

This is why I haven't quit my day job. The last quote I lost out to subway, it seems people just want cheap! And that's not me

I've raised my catering prices because competing with the cheap guys isn't worth it. I'm not going to break my back to give someone the food at my cost. Charge a premium, the people who use you, and you make happy, will refer others.

Two Basic Rules for Starting A Successful BBQ (or any) Business:

Rule #1 - Do not confuse "making money" with "making a living".

Rule #2 - Refer to Rule #1

:wink:


"Most people that are in it discourage others considering getting in it."
I can see how statements that I (and others) "in the business" make, when asked if someone should consider starting a BBQ business, could be construed as "discouraging" them from doing so. That is definitely NOT my goal. Please remember that my statements are coming from a position of personal and business experiences and I don't want people to enter any venture with a false expectation.

The first thing I try to impress on those contemplating a BBQ business is that it is a business. It is not a hobby.

The chances of a truly Part Time BBQ Biz being "successful", without regular personal capital input, is probably in the 1% or less range. This is due to the total actual startup/operational costs of compliance, marketing, operations, etc. Even for a part time BBQ Biz there are certain fixed startup/operational costs that will require a minimum amount of gross sales to break even. Then tack on a % for "profit not dependent for living expenses" (remember I am talking about a part time/hobby here).

If a Full Time operation is the goal then you are looking at ALL of the normal startup/ongoing business costs as well as cost of growth projections, budgeting for down cycles, continually evaluating cost of goods from all your vendors; COGS [cost of goods sold], insurance, advertising, etc. This greatly increases the gross sales amount required to break even. Then tack on a % for profit "dependent for living exenses".

My goal is to attempt to describe ALL of the obstacles and preparations that a new biz will experience during startup/operations. I had to learn this from trial and error when I started my first business and it was a costly learning experience. My goal is to help interested parties with the Due Diligence aspect of researching an industry and building their Business Plan.

The Business Plan is where any business should start. I have seen research that shows that 95% of businesses that start up without a Business Plan fail within a year. My personal experiences would back that research up. :-D A business plan does not have to be created by a Harvard graduate. It can be as simple as a written document that lays our your intentions, research and game plan for implementing/maintaining your idea. It is a road map to follow so you don't get lost when all those forks appear in the road during setup/operations.

Regarding costing/pricing:

1) B&M (brick and mortar) "Cost x 3" is meant as a bare minimum guideline for a B&M business to calculate a retail price for a product based off it's cost to them of that product. This formula was generally derived by using industry average data, pertaining to Cost of Goods Sold and a Price that will allow for coverage of ALL B&M business expenses, to return an industry standard Profit Margin. But even a B&M must do it's own periodic analysis of it's own unique costing/pricing in order to not have any unintended consequences arise. B&M operations generally require the highest capital outlay.

2) Catering can be divided into two categories. Full Service and Dropoff. Dropoff pricing can usually use the B&M method and glean a decent enough margin for profitability (some adjusting will be needed in some markets). Full Service is a completely different scenario. To be truly profitable with Full service catering you must calculate your TOTAL cost (of every single item) for that specific job. This includes food, serving equipment, serving staff wages, delivery costs, event equipment (tables, chairs), etc, etc, etc. Add this all up and add on your Margin %. It should all be written up in a contract, with a non-refundable deposit clause, so that both parties are of an understanding what each party is accountable for. You make your money/margin in the writing of the contract....not in the event itself. The contract is what protects/ensures your margin. Operated under good business practices Catering can be very profitable. Catering operations generally require less capital outlay than B&M

3) Vending------Good Luck!!! :wink: Vending profit is more of an art than a science. There are so many variables at each event it is difficult to lay out one plan to use for success. I have found that if I treat a Vending event more like a Catering event I have much more success. i.e. do my due diligence and ascertain ALL of the known up front costs (similar to writing up the contract) and then using the art of estimating amount of product to prepare based on the best historical information that I can obtain for the event. Vending can be profitable as a full venture if operated correctly. I have found that profitability in Vending can also be more dependent on your market than B&M or Catering. Vending operations generally require less capital outlay than B&M or Catering.

HBTMN, With today's economy (and I don't see it getting better any time soon) margins are even harder to come by than they were in the past. Some of your "missed sales", during your test, could have simply been due to your local market economic situation at that time. Some of it could be due to the consumer experiencing a "change" in your pricing practices which is often times resisted. I would suggest, if you can afford to, giving the pricing change a longer period of time for a better test run. My suggestion would be a minimum of 6 months to get a more true analysis. One way to mitigate any "lost sales" during this test would be to see if you can "target" customers with bigger wallets. You never want to turn away those coming to you for quotes but often times you will nail down more profitable events by "seeking them out" and approaching them rather than waiting for them to approach you. We have done this for the last 2 years with great success. Our data shows that our "targets" now comprise ~65% of our business and the "walk-ins" only ~35%. And we make ~15-20% more true margin off the "targets" since they can afford to "upgrade" their experience with higher levels of service. We found that these "big boys" never even thought of approaching us since we are not a B&M. Their assumption was, "We won't bother asking for a quote from them since they don't have a store front and therefore surely couldn't handle the job". Perception is a funny thing a times and can also be a limiting factor for the consumer when they allow themselves to make decisions based on their inaccurate perceptions. I see it as part of my job to point out these inaccurate perceptions to these future customers. :grin: Of course each market has it's own idiosyncrasies but in general terms aggressive "market targeting" can be very lucrative in almost any/all markets.


I know this is a long post but it really is impossible to lay it out in real terms in a short one. I really need to pick back up on writing that novel I started a few years back entitled......"The Enigma That Is BBQ". :mrgreen:

All I do right now is do food vending and events. Its hard to know how much to cook and when its busy its hard to judge how long your going to be busy. Ive sold out many of times and Ive added more meat just for it to slow down and I ended up with a bunch of extra meat.

Many customers ask me if I cater and I've told them yes but have never had prices on my website and have not really pulled the trigger yet.

Ive been trying to study how all the bbq catering companies charge and thats when it starts getting harder because some charge a flat fee no matter what meats and sides you pick and I know one meat must cost more than the next and they are always busy. One charges $30 a person and you pick any 3 sides and 3 meats so their on the higher side. They don't even show a 2 meat option. Some target the low budget people and some target the big budget people. I just think if a guy is charging $22 for any two meats and any two sides their profit will not always be the same percentage.

Im already in a business that I'm the highest in my area and I know Im not as busy as the guys doing the same thing for less. Its really a game. On all the companies I researched I don't know how many have professional kitchens or working out of their backyard so you kind of have to see what their doing but see what works for you and thats what Im trying to learn. I need to pull the trigger soon.