What is food cost and how does it effect your business? Food cost percent is the percentage amount of total food purchases in comparison 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 revenue generated 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. usually in the world of catering most menus are sold as groups. A dinner menu would contain a salad, starch,vegetable, and dessert to compliment the center of the plate. So you would have to add up all your costs and divide by the given menu price.

Having a good understanding of food cost will help you determine your menu pricing and make sure your business is gainful, particularly 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 cover. Going back to the previous Chicken Picatta example, you were making $7.50 per plate. That is good, but I’ll take the $30.00 per person and higher food cost anytime.

You do want to market your product for the highest profit possible. When determining menu cost, 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 asking price. I would also suggest implementing a service charge, they are typically 17-20%. This will help counter-balance 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 business. It effects your bottom line immensely. As an example, you are averaging one thousand people per week. If your food cost is 25% of your spending, it would be two thousand five hundred dollars. If your food cost is 30% of your spending, it would be three thousand dollars. The difference is five hundred dollars per week. That’s a twenty six thousand dollars per year profit. If you are just starting off, you’re probably not going to do those covers to begin with. Just remember, starting off with good habits will stay with you for the lifetime 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 motivated, then starting a catering business is for you.Work clever, work hard, and profit well.

Find realistic points of view in the sphere of how to get a grant – this is your own knowledge base.


Filed under: Home Based Business

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