Pricing & why you do it certain ways

there are many ways to price out events, how and why do you price the way you do?


typically we will price out a menu (not ala carte)

then staff

then any rentals

But in some cases we'll package an event......
food, staff, serviceware for xxx-xxx amount of people $xxxxx

On very rare occasions someone wants everything priced out individually.....many of our competitors work that way and I guess unknown clients want to compare apples to apples.

*do you charge for your equipment? serviceware?
*upcharging on rentals from rental companies? %
*do you decorate, what if the client wants to have a more elaborate display?
*drop offs, delivery fees
*service charges, gratuities, staffing....uniforms, workman's comp.....
*preferred caterers and the benefits/costs

All are questions that come up when working through how YOU design opporating procedures.

I've gotta lunch to prep for, gotta go......

I may not be able to speak for many in the food industry, but I might be able to get the ball rolling in discussing attributes in the service industry.

For example, technically, I am a "Wisconsin reseller."

First off, I need a license and I must charge each client 5.5% sales tax for every product and service dispensed. During the intense gasoline pricing of 2007-08, I also had to charge a 'fuel penalty.'

My sharpening stones wear out. They cost +eight dollars per each, plus shipping. In a good month, I go through at least two of them. This does not take into account all of the tools purchased to even start my services. That is about 4,000 dollars, and it continues to mount as new products hit the market.

Then there is prep time. This involves cleaning of the knife (yes, many arrive filthy), polishing the decorative bright-work, taping the decorative portion of the knife with blue painters tape to avoid scratches, clean up, repair, etc.

Some clients want the knives picked up and delivered.

Business cards. My own shipping cost for new knives out of pocket. Legal fees. The cost of a tax accountant. The cost of test knives ("mules") that will be damaged, destroyed or sold below cost. (In another thread I mentioned the purchase of a Chinese cleaver which may or may not become a stocking item.)

As you can see, any sole proprietor runs up costs many might not consider--including health insurance--and any purchase out of pocket, no matter how slight, effects his end result bottom line. And let's be honest, any good guy is going to do pro bono work.

I charge 20 dollars per inch on high end Japanese kitchen knives. Considering the expense here, it's not a great deal.

For example, my doctor is Japanese and he owns many real-deal knives which have been handed down to him over generations. He ships them to Japan to have them sharpened (polished is the correct term) by a togi-shi.

Imagine his invoice...

Difference between you and Mushroom Girl and myself is we deal with perishable items where as you do not. After figuring out my total cost and projected selling price, I add 20% for unknowns, which when dealing with catering off premise happens all the time. Also it is against the law to include sales tax in price so we add it to final bill and in many cases gratuity is also extra. Sometime I base my price on how big a diamond she has on her finger, and where he has his suits made, where they live and kinda car they drive. Welcome to the Catering Business.:):D

I only give the client a cost per person price, how I break it down is my business. I will make money on everything. I may feel I could give a better price on the food if I get the whole deal. If they want to pick and choose to get the better price on everything, then so be it. Then just have me give a bid on the food. I have always had people ask me to cater an even because they want me to be the caterer. 99% of the time for me a bid is just a process.I have done $90 to $125 per person caterings, you don't play around with looking for to many bids, you look for the right person that can do it .........Bill

In my contracts I break down everything, for example 100 guest. I give a per person price with complete breakdowns of how I came up with cost per person. I feel the customer has the right to know were all their money is going and in what areas.Whether or not if I am adding cost to rentals for my role/responsibility in producing them or what my food cost/labor cost is, is my business. I break it down to what I am charging, not what it will cost me.

Food: $2,300.00
Rentals: $600.00
Staff: $800.00
Ect.....
Ect.....

Cost Per Person $37.00

If you are selling a package plan, everything included you don't have to do this.
Only sales tax xtra.

On an outside gig rental co gives you bill lets say 500.00 you collect bill from client yet you pay rental co. 15% less then his bill. This was standard practice in NY. Thats his commission to you for using him.:bounce:

Same quandry

I have a client for whom I wrote my standard proposal -

10 guests - $85/guest

Chef Fee - $75/hr. (5 hr. min)
Servers - $35/hr same minimum
Transportation fee - $85

Never have a problem with these charges. In this case, and I know about how you shouldn't be looking into peoples' pockets, these potential clients are filthy rich. I have not changed my fee structure based on this fact. I know their situation because they are friends of my family going way back.

I know these charges may seem hi, but it is NY, and they are pretty on par with the industry here. The dollar amount it not my concern it is more that she is having a problem with the separate fees. (chef fee and transpo in particular.)

any thoughts?

Banquet Charges

:rolleyes: My charges are similar:
Food Cost=Actual cost for all food including seasonings and spices
Labor cost=Cooking Chefs per 100 people $80-$150&up per hour 4 hour min., Carving Chefs & Servers $50per hour.
Expenses= Propane, Electric,Charcoal, wood, Sterno & Paper Products etc.
I don't use rental services.
If they need Chafers, Carving Stations, Fountians, Linen, Tables & Chairs they rent them.
I deliver within a 50 miles radius (no charge) any farther I suggest someone else.
It is strictly Food Cost+Labor Cost +Expenses.
It makes no difference whether they eat Turkey, Prime Rib, Lobster or Kobe Beef.
And I have never believed in getting "kick backs" from purveyors for using them.:thumb:

When you do parties like we do 1000/2000 people outside in air conditioned tents you are forced to use rental companies . If I were doing small scale parties of 50 to 200 I would not rent either, I would have my own equip,and we do for up to 300, but to tie up all my $$ in equip to do that many guest 6 or 7 times a year is insane(just the space and storage factor alone). Rental co delivers to job site, packages well. picks up from sight> I have no trucking or shlepping that my staff has to waste time on. Plus rebate from rental co. is not really kickback it is the wholesale price as they rent to retail clients also and charges them different rate then they do us. Based on cost ,polishing, handleing, shipping & depreciation it makes more scents for us to rent.

Interesting.

If you own your catering business it does not necessarily mean you cook at the parties.

I've several friends who are not in front of the stove much any more.....they charge for kitchen staff, waitstaff etc....
Part of the problem with being owner/chef is that some clients figure you are making a profit on "food" so why are you charging "chef" time. If you sent someone else it'd be ok. weird, but true.
Brooklyn, it almost makes you want to change to end price and not break it down for small dinner parties.
Wonder what Michael Roman says about this.....

Interesting point

I never would have thought of it that way, Shroom... Thanks. I will consider that in my next proposal.

You are safe(I would not compete with you)

:rolleyes: You are safe, I would not compete with you in todays market with the staff that's available, my maximum is 500, minimum 100.
I have done as high as 5000 with 50 double sided buffet lines but not anymore. I didn't move to Florida to become grey-headed (only my beard is grey.) And I don't pay storage.


And Shroomgirl: The food is sold at my cost and sometime we'll shop together and the cooking is done on and off premises. I get Mike's Catering Mag. also but, then I don't always agree with everything that is printed anyway.:thumb:

interesting how we all have chosen different ways to price....that's why I started this thread.

Agree with you shroomgirl. But it must be better if you cook and has the skill to handle kitchen in any cost.

why? there are many talented cooks out there.....my dear friend Brian Young is on the phone & computer, when he's not out doing site visits or shmuzzing.....he's got full time kitchen staff as well as a huge event staff list.

If you get to a certain size, the next step is multiple parties on the same day.....hard to be two+ places at one time.

What a surprise!
This post i so qualified !
Thanks for sharing !

I price much the way you do.

Price per person

Staff (Wait, Maitre d' hotel)

Equipment rental

my chef staff is included in my price per person because I don't want to argue with a client about how many assistant chef's I need in my kitchen. So, I simply cost out the number of hours my assistant chefs will be working and add it in to come up with the "per person" cost of the food. I call it "overhead." Bad enough I sometimes have to justify the number of waiters on the floor, sigh. I usually give the client the option of my equipment or their provider, but I insist on my staff.

I have only done small events 50-100. I try to budget food cost and divide it by .30 and depending on service i would throw in 15-18% service charge, than sales tax. I'm sure you guys have done this before but this method is kinda primitive I think, even for small events like graduations and other parties. what are your thoughts?

what about value pricing methods, and what your competing are charging? does that play a role in your pricing? if Market P > your food cost based pricing which would you go with?

IMHO, one cannot "price" until one knows and understands ALL the costs involved, fixed and variable. If one does NOT recover ALL costs, then one will "go broke"!

Using "food costs divided by .xxx" will generate a number and it is quick and easy. However, that approach does NOT take into account costs such as labor, rent or mortgage, utilities, equipment, taxes, licenses, insurance, etc. "Food cost ratios" were developed from successful operations but achieving those "ratios", in and of itself, will NOT guarantee a successful operation.

The "minimum" price has to be sufficient to recover all costs involved.

The "maximum" price is what the market is willing to pay.

The "best" price is somewhere in between, a price that results in the volume necessary for success.

"Food cost percentages" are, in most cases, simply the monthly food purchases divided by the monthly sales. They have little, if any, relationship to the profitability of specific menu items nor the expectation of overall profitability.

"Food cost percentages" can be an effective management tool to identify potential problem areas for struggling operations but, IMHO, should NOT be used as the sole basis for pricing or marketing! Neither should "labor cost percentages" nor "Overhead cost percentages" be used by themselves.

Pete, yeah you can tell right away that I'm using the newbie way of costing (at least that's how Ive done it) but it worked for me since I didn't have much overhead to account for and I was dishing out parties cheaper than competition. I've learned a few things about accounting since and I'm trying to put a new costing system together... So the bottom line from an accounting point of view, does any of you professional caterers go through:
a) complete budget to cost out direct materials, Direct Labor, and overhead.
b) use software to price parties.
c) use the "newbie" food cost way.

Not only "direct costs", but also "indirect costs" such as insurance, licenses, fees, inspections, hood maintenance, fire suppression maintenance, etc.
Software can help BUT you still need to know all of your costs to input into the software, remember GIGO, garbage in = garbage out. Without knowing and understanding all of your costs first, ANY pricing scheme will probably result in one of two situations: a) you'll go broke because you are not charging enough to cover your costs let alone generate a profit or b) you will price yourself too far above the competition and you will go broke for lack of businessI reiterate, "food cost percentage" is a "management tool" used after the fact to "fine tune" or analyze a food service business, it is NOT a reliable way to predict effective pricing!

At least IMHO. :thumb:

 Pete you have such good advice, I keep re-reading your posts to understand my own pricing structure, and to tweek it. Thanks bro. I know it's not rocket science but I agree it is very important to understand all costs and what drives them. I have to add, that I am starting to like this accounting puzzle :)