PRICING EVENTS KEYS TO MAXIMIZING PROFIT BASIC PRICING

PRICING EVENTS KEYS TO MAXIMIZING PROFIT

BASIC PRICING FORMULA PRICE= OVERHEAD +MATERIALS +LABOR +PROFIT PRICE= O+M+L+P

OVERHEAD § COSTS THAT REPRESENT THE VARIABLE AND FIXED EXPENSES OF ANY CATERING BUSINESS. § COSTS ARE FIGURED FOR THE YEARAND DIVIDED BY THE NUMBER OF ANNUAL JOBS BOOKED. § WHAT ARE EXAMPLES OF FIXED COSTS? § WHAT ARE EXAMPLES OF VARIABLE COSTS?

EXAMPLE § WARRIOR CATERING HAS A YEARLY OVERHEAD OF $200, 000 § THEY BOOKED 150 EVENTS LAST YEAR. § EQUATION: $200 k/150 = $1, 333 § THIS AMOUNT MAY HAVE TO BE LOWERED FOR SMALLER EVENTS, LARGER FOR SIZEABLE EVENTS. § KEEP IN MIND, COMPETITION IS ALWAYS AN ISSUE

MATERIALS § INCLUDES COST OF FOOD AND BEVERAGE, HANDLING, AND DELIVERY. § EX: DRINK, APPETIZERS, ENTRÉE AND DESSERT $6. 52/PERSON FOR 100 GUESTS= $652. OR FOR 50 GUESTS @ 2 SERVINGS

LABOR § SERVINGS COSTS, FOOD PREPARATION, COMPENSATION, SICK PAY, BENEFITS, INSURANCES § EXAMPLE: 4 SERVERS ARE NEEDED FOR A 4 HR. EVENT. THEY ARE PAID $20/HR. 4 SERVERS x $20 x 4 HRS. = $320

PROFIT § AMOUNT EARNED AFTER EXPENSES ARE PAID. § PROFIT PROJECTIONS ARE USED. § EXAMPLE: WARRIOR CATERING NEEDS TO MAKE $120, 000 / YEAR THEY ESTIMATE THEY WILL BOOK 150 EVENTS $120, 000/150 = $800

PRICING THE EVENT § OVERHEAD = 1, 333 § MATERIALS = $652 § LABOR = $320 § PROFIT = $800 TOTAL PRICE= $3105 CAN BE ROUNDED UP TO $3200 THEN DIVIDED BY THE NUMBER OF GUESTS TO GET A COST PER GUEST OF $64.

FOOD COST CALCULATIONS § TOTAL COST OF FOOD ITEMS TO BE SERVED § ITEMS ARE MARKED UP BY THE INDUSTRY NORM (TYPICALLY 3 -5 TIMES THEIR COST § FORMULA COST PER UNIT= PURCHASED COST/NUMBER OF UNITS EXAMPLE: FLOUR $1. 00/5 LBS. = 20 CENTS/LB

PRODUCT AVAILABILITY § UP TO DATE KNOWLEDGE IS A NECESSITY OF COST AND AVAILABILITY § MAY HAVE ISSUES WITH SPECIALTY ITEMS THAT ARE RARE OR IMPORTS § PRODUCTS VARY GREATLY IN PRICE BASED ON SUPPLY AND DEMAND WHAT MAY CAUSE A CHANGE IN SUPPLY OR DEMAND OF A PARTICULAR FOOD ITEM? HOW WOULD YOU ADAPT TO THESE CONDITIONS?