The Simple Guide to Pricing
As a fast casual food operator, pricing your menu items correctly is crucial to ensuring profitability and competitiveness in the market. In this article, we will demonstrate a step-by-step approach to pricing food using real-world examples, focusing on three different operations: catering, brick and mortar, and mobile food operations.
We will utilize a fixed day rate and receipts from food suppliers to determine the end price of menu items. In this example, it is important to note that all three operations will purchase the same amount of food to feed the same number of guests from the same supplier. This will show you how important it is to account for your overhead to determine what is a profitable amount to charge.
Understanding the Day Rate
The day rate represents the total overhead costs, including labor, rent, marketing, and other expenses, divided by the number of operating days. This rate will vary depending on the specific operation and location. For this example, let's assume a day rate of $2,500 for the caterer, $1,500 for the brick and mortar, and $1,000 for the mobile food operation.
Starting with a Virtual Clean Slate
To simplify the pricing process, let's assume that each food operation starts with a virtual clean slate. This means that the caterer will only purchase ingredients specifically for the event, and the brick and mortar and mobile unit will only purchase ingredients for the day. This approach eliminates the need to account for pantry staples and allows for a more accurate calculation of food costs.
Catering Operation
For a catering operation, it's essential to create a customized menu for each event to minimize waste and optimize profits. Let's consider a real-world example of a catering order for 25 guests.
Menu:
- Grilled Chicken Shawarma with Tzatziki Sauce and Pita Bread
- Roasted Vegetable Skewers with Chimichurri Sauce
- Mixed Greens Salad with Lemon Vinaigrette
Food Costs:
- 25 lbs boneless, skinless chicken breasts: $120 (receipt from food supplier)
- 25 pita breads: $15
- 5 cups mixed greens: $10
- 2 cups cherry tomatoes: $5
- 1 cup cucumber slices: $2
- 1 cup carrots: $1
- Tzatziki sauce ingredients (yogurt, cucumber, garlic, dill): $10
- Chimichurri sauce ingredients (parsley, oregano, garlic, red pepper flakes, red wine vinegar, olive oil): $15
- Lemon vinaigrette ingredients (lemon juice, olive oil, Dijon mustard, honey): $10
Total food cost: $188
Day Rate Allocation:
- Day rate: $2,500
- Allocation per guest: $2,500 / 25 guests = $100 per guest
Pricing:
- Grilled Chicken Shawarma: $25 (food cost: $4.80, day rate allocation: $20.20)
- Roasted Vegetable Skewers: $18 (food cost: $2.40, day rate allocation: $15.60)
- Mixed Greens Salad: $22 (food cost: $3.20, day rate allocation: $18.80)
Total menu price per guest: $45
Percentage Markup:
Percentage Markup = (Total Menu Price - Total Food Cost) / Total Food Cost = ($45 - $7.52) / $7.52 ≈ 198%
Brick and Mortar Operation
For a brick and mortar operation, we will use the same menu as the catering example, but with a fixed menu price.
Food Costs:
- 25 lbs boneless, skinless chicken breasts: $120 (receipt from food supplier)
- 25 pita breads: $15
- 5 cups mixed greens: $10
- 2 cups cherry tomatoes: $5
- 1 cup cucumber slices: $2
- 1 cup carrots: $1
- Tzatziki sauce ingredients (yogurt, cucumber, garlic, dill): $10
- Chimichurri sauce ingredients (parsley, oregano, garlic, red pepper flakes, red wine vinegar, olive oil): $15
- Lemon vinaigrette ingredients (lemon juice, olive oil, Dijon mustard, honey): $10
Total food cost: $188
Day Rate Allocation:
- Day rate: $1,500
- Allocation per guest: $1,500 / 25 guests = $60 per guest
Pricing:
- Grilled Chicken Shawarma: $10 (food cost: $4.80, day rate allocation: $5.20)
- Roasted Vegetable Skewers: $8 (food cost: $2.40, day rate allocation: $5.60)
- Mixed Greens Salad: $12 (food cost: $3.20, day rate allocation: $8.80)
Total menu price per guest: $20
Percentage Markup:
Percentage Markup = (Total Menu Price - Total Food Cost) / Total Food Cost = ($20 - $7.52) / $7.52 ≈ 166%
Mobile Food Operation
For a mobile food operation, we will use the same menu as the previous examples, but with a higher day rate allocation due to the increased operational costs.
Food Costs:
- 25 lbs boneless, skinless chicken breasts: $120 (receipt from food supplier)
- 25 pita breads: $15
- 5 cups mixed greens: $10
- 2 cups cherry tomatoes: $5
- 1 cup cucumber slices: $2
- 1 cup carrots: $1
- Tzatziki sauce ingredients (yogurt, cucumber, garlic, dill): $10
- Chimichurri sauce ingredients (parsley, oregano, garlic, red pepper flakes, red wine vinegar, olive oil): $15
- Lemon vinaigrette ingredients (lemon juice, olive oil, Dijon mustard, honey): $10
Total food cost: $188
Day Rate Allocation:
- Day rate: $1,000
- Allocation per guest: $1,000 / 25 guests = $40 per guest
Pricing:
- Grilled Chicken Shawarma: $12 (food cost: $4.80, day rate allocation: $7.20)
- Roasted Vegetable Skewers: $10 (food cost: $2.40, day rate allocation: $7.60)
- Mixed Greens Salad: $14 (food cost: $3.20, day rate allocation: $10.80)
Total menu price per guest: $20
Percentage Markup:
Percentage Markup = (Total Menu Price - Total Food Cost) / Total Food Cost = ($20 - $7.52) / $7.52 ≈ 166%
In conclusion, pricing food for your menu requires a careful consideration of food costs, day rate allocations, and target profit margins. By using the formulas and examples provided in this article, you can determine the optimal pricing for your menu items and ensure a profitable and competitive operation.
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