Food Costing For Caterers

Last Friday afternoon I had a great conversation with Jim Israel – a business consultant from Philadelphia Pennsylvania. We were talking about the importance of caterers managing their food costs.

I think all caterers would agree that food costing is a critical component for the success of their company. But at what lengths would you go to get costing information that is accurate and continuously up to date?

I hear all the time, “It’s not worth the time to track costs in full detail – I already have a general idea of costs.” or “It’s going to cost too much in wages to track the level of detail where it would make a difference.”

Whether you manually tabulate every receipt from your vendors in a spreadsheet, or use a sophisticated program like TPP to automatically generate the data, it is important to know your numbers. Let’s consider a very simple example of the numbers for 1 month at a small to medium sized business:

Food inventory cost and kitchen manager labor per month : $10,000
Month sales : $30,000
Calculated food cost : 33%
Other monthly expenses (insurance, utilities, building, etc) : $8,000
Profit for month : $12,000 or 40%

Again, a very simple example!

So what if a program could help us shave a few percentage points (even just 3%) of our raw ingredient cost and kitchen labor? Oh, and by the way, a program will absolutely help you make those savings!  Watch what happens to our example above (assume everything else remains constant):

Food inventory cost & kitchen manager labor per month : $9,000
Month sales : $30,000
Calculated food cost : 30%
Other monthly expenses (labor, utilities, building, etc) : $8,000
Profit for month : $13,000 or 43%

With 12 months in the year, that’s an addition profit per year of $12,000! Money that can then be invested in new equipment, marketing, vacation, etc.

We would probably all agree that the initial time invested up front should bring a significant ROI. So what are you waiting for?

An interesting article I found on calculating menu prices once you know food costs is:
http://www.foodservicewarehouse.com/education/pricing-a-catering-menu/bd175.aspx

Also, for more information about Jim Israel, visit his website : http://www.conjureconsulting.com

Do you have a successful method for calculating food costs? Share your story with us!