Food costs are tremendously volatile, depending on market conditions. Automatic systems can update prices after each delivery so that you always have an accurate profile of the costs of everything you sell in the restaurant. Non-monetary factors include making your rates competitive with other restaurants, pricing menu items based on preparation difficulty and charging more for items that are popular or typically command higher prices at other restaurants.
You must also consider your customers and whether they will pay the prices that you set. You can add all your expenses and subtract your inventory to determine total food costs, but pricing foods is a bit trickier. Portion control is critical because all your costs are based on exact quantities of raw ingredients.
If your costs seem too low or too high for your customers, you can adjust prices by changing the sizes of the portions. Restaurants often offer optional smaller portions, but you should charge a higher percentage for a smaller serving.
Balancing your menu includes choosing foods that have stable prices to counter the prices that fluctuate frequently. This strategy will protect you from the temporary price surges that every restaurant experiences. Pricing for catering and special events is more flexible, but it can be more challenging. Typically, your restaurant has certain fixed expenses, and the topercent food costs automatically make allowances for restaurant operating costs.
Catering jobs and special menus, however, often take more planning because they generate additional expenses. You must consider these extra expenses and your time when calculating costs for these jobs. Big events might have a lower cost per person than a small catering job because you have to cover the fixed expenses of preparing food outside of normal working hours, delivering the food, possibly serving the food, and cleaning up after the event.
The types of pricing for special events include:. You should mark-up every expense instead of just passing along costs because something always goes wrong or the unexpected happens.
Caterers are often expected to provide an array of services for increasingly demanding customers. Depending on the cuisine and menu, you should also add a tariff for preparing special diets and using specific brands. Each job needs to pay for itself and generate a reasonable profit for your time and effort. Many people in the food industry fail to calculate their costs correctly or keep their costs updated.
Once you have a basic formula for determining food costs, inventory and costing software can keep your prices updated automatically. Servers and bartenders can also ruin your calculations by serving overly generous desserts and bar pours or giving customers handfuls of condiment packets, napkins and other peripherals. After items have been priced, you have to pay attention to sales to see if the pricing works in real-world conditions. You could of course drop the item from the menu or lower the price.
Obviously, every menu item is different and receives a wide variety of responses in various restaurants. Restaurant owner have to be proactive and systematic in solving pricing problems, when one important menu item is underperforming. These adjustments and fine-tuning is how a restaurant owner masters the art of pricing and sees how to balance expenses with the tastes of his or her customers.
Content Hub. Yes, I also have found being firm, demanding and not afraid to walk away are also strong negotiating tools, but fear and threats can only take you so far and only last for so long. Longterm, you want to be a good partner with a positive relationship with purveyors so that they always want to bring you the best promotions, pricing and marketing dollars.
You need to maintain the dominant position, but also take time to build a relationship and do what you can to help them and push their specials or products. Specials from purveyors can be a great way to lower food cost by getting limited-time pricing on key items, or by getting an extra bump in margin reduction by buying certain items in bulk.
Most importantly, when trying to build good relationships with vendors, always remember to pay on time. You could get the best price on the cooler and installation, but any value would be negated by all of the cold air drifting right out the door. The same goes for your inventory. Find out if you're spending too much with our Food Cost Calculator. Want to get started? Check out our Restaurant Inventory Management Guide.
In North Carolina, owners of full-service Cuban restaurant COPA organize their Upserve Inventory system by physical location, meaning they can take inventory at the bar before moving onto the pantry, instead of running back and forth between the two. It is also critically important that you are consistent in your organization.
Label everything with both the item name and its par level, and denote the exact prescribed shelf location for the item. Overdo it.
Make sure no matter how dense the new guy is, nothing will fall out of its place. Double check this daily for compliance. Know each of your ingredient costs, item costs, plate costs, and food costs. Update them regularly, and when changes occur.
Plate and price only what makes sense and makes money. Prime costs are another great barometer and frequently used formula that will always alert an owner to whether any food, pour, or labor costs are off. Keep this number under 60 percent for optimal health. Waste and spoilage can be huge cost killers. Buying portion cuts instead of primals are a great way to keep costing and inventory simple and easy, too.
Consistent portions sizes are a must, as well as serving portions that make sense. Plus, if guests are enjoying the second half of their meal the next night at home, you lose out the next day on that guest returning to the pool of potential diners. Smart forecasting is also an important part of keeping costs low.
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