food costing?

I have an opportunity to sell some food in a Deli type set up in a local supermarket. What type of price structure should I use to put prices on Pre-Prepared items such as pre packaged burritos etc.
And what should I charge on items that I do Prep, salads and things like that.

Any input will be helpful

Thanks,
Chad Entwistle

By Chefmanny (Chefmanny) on Tuesday, October 28, 2003 - 06:57 pm: Edit

I think the first question you should be asking, if you are asking this question is:
Do I really want to do this????

To answer in a nutshell though, it depends on what the market will bear, how much profit you want to make and, what your expenses will be!

By Chad01 (Chad01) on Wednesday, October 29, 2003 - 02:07 pm: Edit

Manny,
I was looking for an average % mark up on these type of goods. I TRY to run about 30% food cost in the sandwich shop that I currently own and am trying to expand my sales at the local supermarket. If I was to purchase, say pre packaged burritos @ $.78/ea and continue to try to keeping @30% food cost I would have to sell them @ $2.60/ea. Now, who would buy that? I do nothing with the burritos but take them out of the box and put a price tag on them. What mark up should I be shooting for?

Thanks,
Chad Entwistle

By Chefmanny (Chefmanny) on Wednesday, October 29, 2003 - 02:46 pm: Edit

Do you have to pay any expenses there?
I would never work for less than 20% profit, but you have to look at tha competition also, see what they charge for similar items

By Chad01 (Chad01) on Wednesday, October 29, 2003 - 03:25 pm: Edit

No competition, very small town. I do however pay the store 10% of sales.

Thanks for the help,
Chad

By Chefmanny (Chefmanny) on Wednesday, October 29, 2003 - 08:20 pm: Edit

Mark it up at least 30% then! Or whatever you want to profit

By Kinglear (Kinglear) on Wednesday, October 29, 2003 - 09:03 pm: Edit

By and large, in a retail setting, when all you do is put a price tag on an item, you sell with a 55% gross margin. So take your burrito cost (.78) and divide by .45 which gives you a retail price of 1.74. Round up to a comfortable price point, say, 1.75 or even 1.89. Don't forget to include the cost of your packaging materials in your raw cost, too.
For items that you prepare-figure at least a 70% gross margin, 75-80 being a better safeguard against shrink. Figure your raw food cost, add what it costs you in packaging materials for the whole lot, then divide by .3 for 70% GM, .25 for 75% GM and .2 for 80%. Then round up to a reasonable and familiar price point.
Shrink in situations as you describe can be a killer-theft, spoilage, mishandling by service persons. Always give yourself at least 5-10% wiggle room in this area.
Many people do not figure packaging materials into food cost-a big mistake for deli type operations. If listed as supplies and operating expenses the IRS takes a very dim view and may force you to pay considerable penalties. The general rule is-if it walks out the door in the hands of the customer, it's inventory and should be counted as cost of goods sold.
Once you have a good handle on what items sell well, price your three most popular offerings at a lower price point than the standard 70% margin--sell at 55-60 to keep them moving quickly.You'll make more profit by selling these below margin, but selling a ton of it. Price your specialty items higher.
Good luck!

By Chad01 (Chad01) on Thursday, October 30, 2003 - 11:02 am: Edit

Thanks for the input, by the way I have been selling the crap out of the burritos for $1.85 so I guess that my gut feelings were on the money so to speak.

Thanks again ,
Chad Entwistle

By Chef_Mars (Chef_Mars) on Sunday, November 09, 2003 - 07:51 pm: Edit

>Thanks for the input, by the way I have been selling the crap out of the burritos for $1.85 so I guess that my gut feelings were on the money so to speak.

But have you been making or losing money on the transactions? Have those sales contributed to your profit? I suggest a little Break-Even analysis study to help you orient your business decisions. Subjects like:: fixed cost, variable cost, unit contribution and total contribution are important. Break Even alalysis is a technique for analyzing a new investment (like a new kitchen, new walk-in, etc), a new product introduction (example: a new menu item, opening a new restaurant or adding a second unit), a price change or, and this is very critical, inaction in response to a competitor's moves.
It is a process that takes numerical data, crunches it, returns sets of other numerical data that must then either be ignored or acted upon.
"When you are out of money you are out of the game"
Culinarily Yours,
Chef Mars