26 You can see that the average cost of the lunch buffet for this restaurant is32.

8 8%, based on 3 exercises. 12) Costs will vary between services; therefore the more exercises undertaenthe more accurate your AVERAGE results will be. Agree the accuracy of the results w ith the Financial Controller. 13) These exercises should be used as a guide to costing, so that the Chef isawa re of how much the buffet is costing to produce per service period. If it is too high he needs to trim it bac. However do not compromise onstandards. 14) N.B. where an a la carte menu is in operation during a buffet service. Donot include the covers, revenue or food consumed for a la carte as this willnegate the result of purely counting the buffet. he Formula Food Cost % = (Beginning Inventory + Purchases

Ending Inventory) / Food Sales

Memorize this: FC% = (BI + P - EI) / S Food cost is calculated by taing your beginning (AKA opening) inventory for the period (e.g. at Oracle it s one wee) and adding all of your purchases to that nu mber. You then subtract the ending (AKA closing) inventory number. This gives yo u the theoretical value of what you used that wee in product. That number is di vided by your sales and a percentage of sales is calculated for the cost. So whe n we say you have a food cost of 40% that means you spent .40 for every dollar y ou too in sales. Example Your data: $10,000 beginning inventory, $2,000 in purchases, $10,500 ending inve ntory, $5,000 in sales. Your formula: FC% = (BI + P - EI) / S (10,000 + 2,000 = 12,000) - 10,500 = 1,500 1,500/5,000 =.30 or 30% food cost Lewis Tips

Pricing Options There are generally three ways to price menu items: Fixed Pricing With fixed pricing, each menu item has a fixed cost. You can p rice items on a per-person basis, and charge your customer according to the numb er of people at the event. Or you can price items on a platter basis. For exampl e, you could charge $16 for a platter of 15 hors d oeuvres, or $200 for a smoed h am carving station that serves 50. Tiered Pricing Usually, the larger the event the lower the per-person pricin g. This is because it is more cost-effective for you to produce food in bul for a big event than to produce food for a ten-person dinner party. In tiered prici ng you use a fixed pricing system, but instead of one fixed price for each menu item you have three or four, and you charge according to the size of the event. For example, the per-person cost of fried chicen for an event of 50 people or l ess might be $20, while the cost for an event of 200 is only $17 per guest. Custom Pricing In a custom pricing system, you only quote customers on the c ost of food for an event after they have given you all the details about the fun ction. This allows you to customize a menu for the customer and more accurately determine the true costs of the ingredients and food preparation before you give a quote. Choosing a Pricing System Many customers prefer a fixed price catering menu, since they themselves can eas

ily calculate how much they will have to pay for food. However, eep in mind tha t catering larger or smaller parties will incur different food and food preparat ion costs. Often, caterers have found that producing a menu for a smaller party will have almost the same overall costs as producing the same menu for a party t wice that size. Therefore, a tiered pricing system is a good alternative to fixe d pricing, since customers can still estimate how much the food will cost, but y ou factor in variances in expenses due to different party sizes. Here is an exam ple of a tiered pricing menu: Menu Item Less than 50 people 50-150 people 150+ people Filet mignon on a bed of spinach $23.95 per guest $22.45 per guest $20.95 per guest Stuffed portobella with mushroom gravy $22.95 per guest $21.25 per guest $19.95 per guest Poached salmon fillet $27.95 per guest $25.95 per guest $24.25 p er guest Sesame-crusted chicen breast $22.45 per guest $21.15 per guest $19.75 per guest Most caterers use a price-per-person or price-per-platter system, but unfortunat ely, once you print a fixed price on your menu, you can t go bac on it. By far th e most financially safe way to price menu items is custom pricing. Consider usin g a flexible pricing system that is quote-only. That way you can gauge your cust omer and the difficulty of the contract before finalizing a price for the food. You can also more easily alter and customize the menu and pricing for individual clients. Determining the Marup on Menu Items The first thing you need to do when determining a marup on your menu items is t o calculate the food costs. Determine the costs for both large and small parties . If you use fixed pricing, calculate the average cost according to your expecta tions of what sized parties you will be catering. For tiered pricing, calculate the cost for different sized events. No matter what pricing system you use, mae sure you include the cost of labor for preparing the food when you calculate yo ur food costs. Most caterers have found that the following equation offers a good arup on menu items: Food Costs x 3 = Final Menu Price With this marup, you will mae about a 67% margin on your food. At first glance this seems lie a very high margin. However, the unpredictable nature of cateri ng and the various costs incurred due to transport, set-up and clean-up maes it a reasonable marup. Remember: when catering buffet-style, it is always all-you -can-eat. Running out of food would be terrible for your reputation. You should always bring at least 10% more food than you expect you will need. Compensate ac cordingly in your pricing. Other Factors to Consider Other factors to consider when pricing your menu items include the following: Client s willingness to pay. If you use a custom pricing system, you should al ways consider the client s willingness to pay when you determine the price of your food. Some clients want the most expensive food and service possible. Others ma y be woring with a tight budget. The majority are willing to pay somewhere in b etween. Learning what ind of customer you are dealing with so you can alter pri cing accordingly can greatly improve your profitability. You can even offer a se parate high-end menu, mid-priced menu and budget menu to meet different customer s needs. rule-of-thumb m

Competition s pricing. Many customers are price-sensitive, especially since co ntracting a caterer can be a pricey affair. Before you determine fixed pricing f or your menu items, you should always tae a loo at the competition. Knowing wh at other catering companies are charging will allow you to price your menu items at a competitive rate. Desired profits. No matter what ind of pricing system you use, if the retur n on investment you get from an event is not worth the time and An old-fashioned cash registermoney put into the event, your pricing is too low. Determine exact ly how much you need to mae from an event to mae it worth your while, and pric e your menu items accordingly. Extra Fees In addition to the menu pricing, most caterers tac on extra fees to the total c ost of catering the event. You can charge clients for extra labor, rental fees, cae cutting fees and delivery fees. If you want to have your menu priced compet itively but are not maing the profits you desire, you can mae up for it by tac ing on these additional fees. Just eep in mind that they need to be fully expl ained on your catering proposal and quote, or clients might feel they are being swindled. These pricing tips offer a good guideline for determining the cost of menu items . However, sometimes there are factors to consider that are unique to your busin ess. For example, if you run a restaurant, mae your catering pricing somewhat s imilar to your restaurant pricing or your customers will feel they are not recei ving a good value. As another example, if you have won catering awards in your r egion, you can increase your pricing significantly, since clients will perceive your services as having a better value. So when pricing your menu items, mae su re to consider as many factors of your business as possible to determine the opt imum pricing structure.