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How to work out profit margin for catering

post #1 of 14
Thread Starter 

Hi

 

I have recently taken over Coriander Group http://coriandergroup.com and have been struggling to work out costing. I have been told to just work out cost and x by 3 to work out how much we should charge. Has anyone got any input?

 

Deepika

post #2 of 14
Quote:
Originally Posted by deepikasahni View Post
 

Hi

 

I have recently taken over Coriander Group http://coriandergroup.com and have been struggling to work out costing. I have been told to just work out cost and x by 3 to work out how much we should charge. Has anyone got any input?

 

Deepika

Hi Deepika, welcome in. My input is that the "times-3" rule is a great way to lose money and control of

your business revenue. There are  a couple of logical reasons. First, the cost of food does not have a

direct relationship to other expenses incurred in providing your catering service. And those other expenses

can vary WIDELY....such as rentals, service ware provided, type of service--plated, served, action-station

buffet, self serve, drop off, travel to and from, prep and cooking time required (even shopping time required)

serving time, labor help required, etc.

Second, if you're serving... 100 guests for example, there is a huge difference between 3 times the cost of

serving beef tenderloin and grilled salmon with all the trimmings to those 100 people , vs serving them

Fettuccini Alfredo and beef Stroganoff with salad, rolls and green beans. The relationship between food cost

and price per person is just too variable. 

The only smart way to price an event is to list out (blank paper or pre-made form, etc) all the expenses, rentals, 

labor, food cost and profit associated with that particular event, add in desired profit and divide by number of

guests to get your price per person. 

IMO, if you're trying to use some simple rule like that to get your price, it might be better (=safer) to get a few

more events under your belt before you attempt a solo operation. 

post #3 of 14
Meez is definitly on the right path. Every event has a list of variables that need to be paid for by someone, ideally the customer. In catering you are sell the service just as much as the food and have to account for that as well.
post #4 of 14

hum, 20 years in fine dining catering and there is a question about costing? Why isn't the chef doing it? sounds a little fishy to me.

FOR YEARS I LIVED TO WORK! NOW I WORK TO LIVE!
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FOR YEARS I LIVED TO WORK! NOW I WORK TO LIVE!
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post #5 of 14

Just like building a business from scratch buying an established concern should be proceeded (IMO) by working out some sort of business plan.

During this phase things like costing out jobs should take up most of your research time.

There are lots of different ways you can do this... since you are already into the ownership phase and most likely need a quick answer (slick website BTW) maybe a consultant would be an option.

 

mimi

post #6 of 14

I hate to be a bit of a stick in the mudd on this one however I do have to ask THE most important question:

How, as a managing director, do you not know the costing factor?? That would have been a crucial part of your job if you are the one to create new strategies to earn more money for the business. If you did not even know your costing, how is it that you were able to do your job??

 

Your executive chef is the one who has the knowledge of costing food and labour coming out of the kitchen so that is a start of where to go. The rest is where you will have to roll up your sleeves and get ready to do some extensive research. You will have to phone all the venues that you usually work with and get a price list of the usual costs for an event at their place. You will also have to call the event rental service and get their main price list. This will give you an idea of basic costs that need to be covered. Then, it changes as per event so that will have to be figured out accordingly. You are now the owner so you have to take a good look at all the previous years worth of paperwork and pricing to see what they were doing and how you will be able to improve upon that. 

post #7 of 14
Quote:
Originally Posted by flipflopgirl View Post
 

Just like building a business from scratch buying an established concern should be proceeded (IMO) by working out some sort of business plan.

During this phase things like costing out jobs should take up most of your research time.

There are lots of different ways you can do this... since you are already into the ownership phase and most likely need a quick answer (slick website BTW) maybe a consultant would be an option.

 

mimi

Oh, my bad. I thought she was taking over. I did go to the website against my better judgement, because I think that may have been the intention.

The chef owner has been there for 20 years and doesn't know his food cost? or what the markup should be? Just sayin.

Now, that is a stick in the mud.

FOR YEARS I LIVED TO WORK! NOW I WORK TO LIVE!
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post #8 of 14

@panini I think we are thinking along the same lines as you cuz I did have the WTF moment :eek:

 

I feel bad though cuz this person obviously is in over their head and could financially pay dearly for it. Then again, people surprise me all the time so I am trying to be an optimist ;)

post #9 of 14

And I too have seen inexperienced people become successful when I would've bet against it. 

But then, catering isn't rocket science, with really only 3 parts to consider.... the cooking/prep etc, 

the financial side and..... dealing with any variables that pop up. (and brother they do.)

That last one IMO, is where the "no substitute for experience" comes into play. 

 

Even pricing can be fine tuned through trial and error, as can the food, (unless you poison someone) 

but not being able to handle the wrong unexpected problem popping up in the field can be downright

disastrous. 

 

I do find it amazing though, how many "experienced" caterers try to fall back on the times-3 guide line, 

or as my son would say, "cheat-code" , when they have no understanding of the true dynamics of 

the thing. I don't know if it's laziness and just a non belief when told it really doesn't work. 

At the very least, it certainly results in a lot of underbidding. 

So when they say "hey I've gotten a lot of gigs using that system".... well, I tend to believe them. lol 

post #10 of 14
Quote:
Originally Posted by panini View Post

Quote:
Originally Posted by flipflopgirl View Post

 
Just like building a business from scratch buying an established concern should be proceeded (IMO) by working out some sort of business plan.
During this phase things like costing out jobs should take up most of your research time.
There are lots of different ways you can do this... since you are already into the ownership phase and most likely need a quick answer (slick website BTW) maybe a consultant would be an option.

mimi
Oh, my bad. I thought she was taking over. I did go to the website against my better judgement, because I think that may have been the intention.
The chef owner has been there for 20 years and doesn't know his food cost? or what the markup should be? Just sayin.
Now, that is a stick in the mud.

The OP has ID'd herself as the owner/operator so I took this to mean she bought out the company without the necessary skill to run it...but you guys all caught what I missed ( OP is also the managing director with 10 years experience per the bio with her picture in the "team" tab of the website).

I am confused........

Maybe she will come back and explain if she really needs help or just wanted to pimp her catering company.
Don't know why anyone here would need to hire a caterer tho confused.gif as I would just book with myself lol.

mimi
post #11 of 14
Quote:
Originally Posted by flipflopgirl View Post

Don't know why anyone here would need to hire a caterer tho confused.gif as I would just book with myself lol.

mimi

 

You're gonna BOOK YOURSELF??! :eek: You can go BLIND doing that!!  :smiles: 

post #12 of 14
Thread Starter 

Hi Everyone,

 

Thanks for the varied feedback. I will now try to clarify. 

 

Dad (exec chef) has been running the show for a while with a rough costing and profit margin that, to be honest, has worked. Now I have taken over and want to be a little more exact and accurate. I've only been in charge for the last month and we'v been working through the menu working out the exact cost but finding it hard to work out the labour and profit margin we should add. Each item takes different times to prep so labour is varied.

 

Thanks

 

Deepika

post #13 of 14

Fair enuf.

 

As per the late great Pete McCracken........ how to price a catering job ? 

That is only one of many threads full of really great info.

 

Use the advanced search option and plug his name in.

Then start reading.

Be advised that there will be a lot of posts that have nothing to do with what you need so just take what you want and leave the rest behind.

Also note the dates as some of the data is based on old profit numbers.

 

HTH.

 

mimi

post #14 of 14
Thread Starter 

Thank you everyone for all your advice :)

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