Posted by jack on February 20, 1999 at 22:54:16 :
In Reply to: prices posted by Johnnie on February 10, 1999 at 18:17:35 :
: I would like to open my own catering business and am
: having trouble figuring out what to charge. Do you do
: a certian markup on an item. I can figure a single
: serving price at my cost but do not know how to figure
: what to charge. Please help.
While it is a general restaurant rule to multiply your raw food cost by 3, this simplistic method of costing will not make you competiive, successful or profitable unless all the other caterers in your market have the same overhead as you and take the same approach. If you are able to keep your overhead lower than your competition you will have a decided edge. You can charge the same and make more profit
Apply your weekly fixed costs to your peak demand days - usually Saturday if most of your business is social. This way the rest of the week is gravy. A Saturday party should be worth more. If most of your sales are mon - fri, cover your costs during the week and let the weekend be gravy
If you are a one man show - chef, sales person, waiter (as most of us are at the beginning) make sure you charge for your labor just as if you were paying chefs and servers above and beyond your own salary (always take one) Remember, your salary is an expense, not profit!
After analyzing your fixed costs, figure your variable costs on every party. Food, prep, packing, administrative, (even the time taken to meet with aclient costs you money) Just make sure you make money on everything you sell.
After figuring out what it will cost you to do the party, figure out what it is worth in profit. If it's Monday, a small profit margin might be better than nothing, assuming you get paid up front (no financial risk)
Find out what your competitors charge. You may find, as I did, that your toughest competition are the caterers that are losing money but don't know it. Don't worry, they won't be around long. Don't fall into the trap of charging what everyone else charges
Always remember that percentages are not taken to the bank. Dollars are taken to the bank, and you can go broke with a 10% food cost.