Facts About The Restaurant Industry
Friday, December 21st, 2007One very important fact about the restaurant industry, is the fact that you absolutely need to keep consistent portion control. Ingredients are purchased in weight, count and volume. You will need to calculate the cost of all ingredients in a recipe. Total the costs and divide this by the food cost you want to charge for a menu item. This way you will have a price for your menu for this item.
In the restaurant industry, you will need to count all ingredients. As an example, a cheese burger with tomato, lettuce, and mustard on a wheat bun with a small bag of potato chips has a total cost of $2.10. If you want to get a 30% food cost for this item, you will need to divide $2.10 by 30 % (.30), which will give a menu price of $7.
Try to keep your food costs between 22 and 34%. If your food cost is 22%, it will mean you will be spending 22 cents of every dollar for food. This would leave you 88% of every dollar to cover labor and other expenses.
If you want to use the factoring method, you can multiply the cost of ingredients by three. This will only give you the cost of the menu item and not include other costs.
When you use gross margin pricing, the formula is profit minus the cost of goods sold divided by the net sales. For instance a gross profit margin of 33:1 means that for every sales dollar, you will have 33 cents to cover other expenses. This is the best for calculating a dish with a high ingredient cost in the restaurant industry.
The Prime Cost method works by adding the cost of labor and cost of food, then add a percentage for profit. This method is good in the restaurant industry for dishes that need a lot of preparation.
Competitive Pricing matches what other restaurants charge for the same product, with what you charge. Compare the prices by studying the menus, and price your product not much higher or lower than what others are charging. (more…)