gross profit & menu costings

[robbieskye]

hi all i have just been given a possition as a head chef, although i do not have my papers and i am trying to cost a menu with a 60% gross profit margin my cost of steak is $15.99 k/g, salad is approx 70c chips or side orders are about the same, how would i work this out?

[kuan]

1) Take all your costs and add them up.

2) Divide all by 40

3) Multiply all by 100

[robbieskye]

is it really that easy, what about staff cost, cost of ameneties etc

[Jayme]

you said gross profit, did you mean net profit? calculate all your fixed costs, and labor costs- so you know what you are working with. What percentages are you allowing for optimum food cost? labor? fixed expenses? and then profit? Many places start with 25% for each and then adjust as needed.

[thetincook]

I've always seen used (in generic format):

Gross Reciepts
Less Cost of Food and Drink Sold
Less Cost of Labor (Usually ony direct hourly labor both)
---------------------
Gross Profits

Less Operating Expenses (Overhead, fixed costs, salaried jobs, etc)
---------------------
Income from Operations

Plus Other Income
Less Other Expenses
---------------------
Net Income

Keep in mind, you are not going to have the same food cost% for every plate
You'd more likely see a FC% on the steak plate of 45-50% while on chips and salad see a FC% of only 6-10%

You must consider each items contribution to profit and its estimated volume of sales. It helps if you already have the menu mix of sales already. In Culinary we studied a method where the menu items were sperated into four catagories. Stars (high sales, high profit), Dogs (low sales, low profit), Puzzles (low sales, high profit), and "I forgot what word they used" (high sales, low profit). I'll see if I can find my textbook from school.

Also learn to use Excel or other spreadsheet program if you haven't already.
There are a variety of places you can get industry averages for your area, starting with your local restaurant association. I've used these to base my budget off of.

[robbieskye]

thank you so far it has been a great help, in regards to profit all i need to worry about is kitchen as the rest where i work has seperate cash record for the food register meaning that i do not have to worry about advetising, beverages ect. when it comes to amenities i only have to worry about % electricity and all gas. p.s. i had a reaelly s@#$ty night tonight because manager does not seem to understand that you need to have more than just enough staff for the week so when some one calls in sick(or 2 people)you have someone to fall back on!

[dinerminer]

Typically, gross profit is calculated as gross sales minus cost of goods (food and beverage) or, selling price of product minus cost of product. Labor is almost universally treated as an operating expense.

Don't try to cost your menu out at 40% food cost for every item. Lower cost items tend to have higher profit margins and higher cost items tend to have lower profit margins. Look at your sales mix and see what you are selling, this will give a lot of insight as to where the pricing thresholds are.

[robbieskye]

o.k. i understand this so as an example if i had an rib fillet on the bone or a wague steak at around $6.50aus - $7.00aus(cost price)a steak + about $1.00aus for side order and i sell 10 a day how would i compare this to a $2.00(cp) open grill sandwich that i sell 70 a day ?

[kuan]

You really need to brush up on this math. This will kill your career if you cannot run a kitchen using simple food cost calculation. You cannot count on cheftalk to do it all for you. Please, for the sake of all of us and yourself, brush up on your math!

Your steak costs $8+$1=$9. If you want that to run 40% gross you take $9 and divide by 40.

9/40=0.225

Multiply that by 100 and you get $22.50.

You're selling 10 of those so your total is $225

Your cost for 10 of those is 225*0.4=$90 and the rest is gross profit, $135.

That sandwich is 2/40=0.05

Multiply that by 100 and you get $5.

You're selling 100 of those so your sales from that is $500

Your cost for 100 of those is 500*.4=$200

Gross profit is $300.

[dinerminer]

Kuan, you can make your formula even easier. Take the product cost ($9) and divide by targeted cost percentage (40% which is .40). $9/.40 = $22.50. Same thing, one less step.

[DMT]

You'll also have to take into account what the market will bear...

As in what's your competition offering.

You can have all your pricing set to turn a respectable profit, but if there are no customers, due to too high a price, 60% of zero is still zero...

Sorry to be a downer, but it's a consideration that must be made...

[robbieskye]

sorry kuan mate but you seem to have mis understood the last post that i put up what i was asking was how much % profit do you want to try and get from a low cost, high moving item compared to a high cost, low moving item, do you try and get 80% profit out of the low cost item or do you still stick to the 60% profit margin? there is not a great deal of competition so i can probable get away with selling at a slightly higher price

[Risque Cakes]

always hated that class! Almost failed it too, if I hadn't had a sympathetic Chef/Instructor that saw me busting my hump in his class! Never missing, never late and staying for tutorials and most important..

DOING MY BEST TO PASS! and I'm NOT a stupid person!