B2B Markeplace

What is food cost and how does it effect your venture? Food cost percent is the percentage amount of total food purchases in contrast 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. In general 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 entree. 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 profitable, specifically 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 charge for it. An example would be a Tenderloin, 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 plate. Going back to the

original Chicken Picatta example, you were making $7.50 per cover. That is awesome, but I’ll take the $30.00 per cover and higher food cost any day of the week.

You do want to push your product for the highest margin 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 business. 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 profit 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 routines 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 primary motivation must be to make money. If you are money motivated, then starting a catering business is for you. Work smart, work hard, and profit well.

Get money for your business startup – read and watch videos about how to get a grant on this blog.