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Help with setting cake price.

post #1 of 7
Thread Starter 

I have been struggling with our cake pricing. So let me give an example and ask my questions.

 

My ingrediant cost for our 1/2 sheet cake (cake made with butter and a real Italian buttercream) is $18.06.

 

This number is just the ingrediant cost, there is no labor included or overhead.

 

Question is there a percentage that I should maintain from what I charge to what the ingrediants cost is.

 

For example if I price the cake at 50 dollars am I high enough.

 

Question 2: If I cost it by figuring out all my costs labor, overhead, paper ingredianets etc and then apply my expected profit percentage top of all of my costs, what is a reasonable percentage in the baking industry.

 

I have a bakery in an area that appreciates great food, but I really have to watch what I charge. I have no compeditors near me that makes baked goods using the ingrediants that we do.  We make our cakes from good local products, no shortening or margerine all butter and no preservatives. After doing my yearly books, I am suspecting that we are not charging enough for some of our products as the ingrediant costs seem a little high.

 

Question 3 what is a good ratio of cost of ingrediants vs gross sales at the register.

 

I really would appreciate some advice here from bakers and pastry chefs with their own buisness or have run them. This is causing me to loose sleep and I really could use some advice here.

 

Thank you very much

post #2 of 7

Hi! I've never had to worry too much about pricing as I've mostly worked in hotels or restaurants where there's an executive chef who deals with these things, but I see no one else has answered this yet so I'll do my best to at least throw some things out there..

 

The primary thing is food cost.. it would be a good thing to figure out what you want/can afford your food cost to be. sometimes you can sell something with a 50% food cost, because you sell other things with a lesser percentage of food cost to make up for it. Most places I've been, an overall food cost over 30% is really high. Selling a cake for $50 that costs you $18 is a high food cost... but then there's also 'what the market will bear' to consider.. what are other cakes in the area selling for? It sounds like they're going for less because they're using lesser ingredients.. but people will pay more if you're advertising better quality.

 

A quick rule of thumb that one chef told me was to multiply the food cost of something by 3, then add 10% on top of that.. so if a cake costs you 18.06 to make, you multiply that to get 54.18, and add another 5.42 on top of that to have a base price..... then adjust accordingly-- like if a cupcake costs you 18 cents to make, you're certainly going to be able to charge more than 54 cents.. but if you think you'll have trouble getting almost $60 for a cake, you can adjust that down. Ideally the inflated cupcakes and the deflated cakes would balance out.

 

Hope that helps some..

:)

post #3 of 7

In my experience (many years of general management of retail specialty food stores) we required an overall gross profit margin from any prepared food department of 70%. This includes any food that is prepared in house from the bakery to deli items. To achieve this you figure your raw food cost including any sales supplies that walk out the door with the customer-cupcake liners, doilies, cake boxes, bags etc. Make that X.

 

Then you multiply that number by your percentage of shrink or loss by a best guess (take the total value of what you offer for a 1 day sale and figure the percentage that is left when the day is done)-you should aim for about 10-15 %. So X x 1.10=Y

 

Then take that number and divide  that number by the reciprocal of the targeted gross profit margin. So Y/.3=Retail Price if you are  aiming for a 70% gross profit margin.

 

However, consider that you want to aim for an overall Gross Profit Margin of 70% across the board. You can achieve this by identifying what items you sell a lot of and price them with a much higher margin if the customers' perceived value of that item is in line with what you charge. For example, if you sell heaps of cupcakes that cost you $.50 each including packaging and shrink, you could reasonably charge $3.00 each at a gross profit of 84% and then lower the price you charge for the sheet cakes to reflect a gross profit of say, 60% if you feel that you could sell more of them by charging less. 

 

BTW, it's hard to imagine why a 1/2 sheet cake should cost you over $18.00 in raw materials without including any packaging in that number. Butter, flour, sugar, eggs and milk are all relatively inexpensive. Are you sure you are figuring your yields accurately? We use almost totally organic ingredients for the baked goods we sell with similar buttercremes and come in considerably lower than that-around $7.50 for a sheet cake that we charge $30.00 for to give us a GPM of 75%. Might be worth looking at your suppliers to find some better deals.

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post #4 of 7

Quote:

Originally Posted by Baker63 View Post

 

I really would appreciate some advice here from bakers and pastry chefs with their own buisness or have run them. This is causing me to loose sleep and I really could use some advice here.

 

Agree with other comments but this may help a little better:

 

What is your total cost to make ten cakes, or fifty cakes? I'm asking this because I want to know how often you have to re-supply, and the total cost at that scale.

 

Cost x 3 is a good swag/estimate because you have tax, overhead, waste, etc... Don't get buried in the details however.

 

Lots of missing details here - so that's where those details live.

 

Look at things from the 100, 1K level instead of the one-by-one level. If you get income on 100 cakes, minus cost of 100 cakes - what is your profit after costs? Adjust from there.

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post #5 of 7

it depends on a lot of things, but we charge $90 for a half sheet. its not unreasonable.

post #6 of 7

Like it was mentioned above, your pricing will be dictated by what the market will bear and what your competition in town charges. However, I usually price sheet cakes like wedding cakes - price per slice. Usually about $4.00 per slice is reasonable and average, and if you're getting 20 servings of cake which is pretty generous servings), $80 isn't unreasonable. Think about it. An 8" cake will provide about 10 servings, and most people who make nice cakes will charge around $35-$50 per cake here.

post #7 of 7
Thread Starter 

Thanks for all the info. I have found all your comments very helpful. 

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