What is food cost and how does it effect your concern? Food cost percent is the percentage amount of total food purchases in comparison to the amount of revenue generated.
You are offering Chicken Picatta for a menu price of ten dollars, and the ingredients cost you two dollars and fifty cents. To form your food cost percent you would simply take your cost divided by menu price equals food cost percent. In this example, you would take $2.50 divide by $10.00= .25 or 25 percent.
Now what does this mean when your starting a catering business. generally in the world of catering most menus are sold as sets. A dinner menu would contain a salad, starch,vegetable, and dessert to compliment the entree. So you would have to add up all your costs and divide by the given menu price.
Having a good handle on food cost will help you determine your menu pricing and make sure your business is cost-effective, specifically in respect to helping you determine menu costs. Ideally, food cost percent would be 20 to 25 percent. Of course this also depends on what you are serving and what you can sell it for. An example would be a Lobster Tail, it might cost you $15.00. You can sell it for $45.00. Your food cost would be 33 percent,but your making $30.00 a person. Going back to the previous Chicken Picatta example, you were making $7.50 per plate. That is good, but Ill take the $30.00 per cover and higher food cost any day of the week.
You do want to market your product for the highest margin possible. When determining menu cost, you must also consider what the competition is charging. You dont necessarily want to be the cheapest, but you must be able to justify the charge. I would also suggest implementing a service charge, they are typically 17-20%. This will help equalize vehicle maintenance costs, rental, etc, and you will have some left over to put in your pocket.
Knowing your food cost will help you manage your company. It effects your bottom line tremendously. As an example, you are averaging one thousand covers per week. If your food cost is 25% of your money out, it would be two thousand five hundred dollars. If your food cost is 30% of your purchases, it would be three thousand dollars. The profit is five hundred dollars per week. Thats a twenty six thousand dollars per year increase. If you are just starting off, youre probably not going to do those volumes to begin with. Just remember, starting off with good routines will stay with you for the duration of your business.
Remember, you do want to have fun with starting a home catering business but your key motivation must be to make money. If you are money hungry, then starting a catering business is for you.Work smart, work hard, and profit well.
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