What is food cost and how does it effect your business? Food cost percent is the percentage amount of total food purchases in relationship to the amount of revenue generated.
An example:
You are proposing 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 cost of food 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 your own catering business. usually in the world of catering most menus are sold as . A dinner menu would contain a salad, starch,vegetable, and dessert to compliment the main course. So you would have to add up all your costs and divide by the given menu price.
Having a good knowledge of food cost will help you determine your menu pricing and make sure your business is lucrative, distinctively 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 mark it up 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
original Chicken Picatta example, you were making $7.50 per cover. That is good, but I’ll take the $30.00 per plate and higher food cost any day of the week.
You do want to push your product for the highest return possible. When determining menu price, you must also consider what the competition is charging. You don’t necessarily need 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 remarkably. As an example, you are averaging one thousand people 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 difference is five hundred dollars per week. That’s a twenty six thousand dollars per year raise. If you are just starting off, you’re probably not going to do those covers to begin with. Just remember, starting off with good practices will stay with you for the duration of your business.
Remember, you do want to have fun with starting your own home catering business but your key motivation must be to make money. If you are money motivated, then starting a catering business is for you.Work intelligent, work hard, and profit well.
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