flip side of this argument is that the cost is sunk, there is nothing you can about it now, so try and recover some form of revenue here. If you want to do this, at least make a note of what you have used and call it specials – cost. This way you can match the cost against any revenue you make on specials, which keeps it clear in your gross margin report. Specials should not be there to drastically undercut your main menu, or guess where the next stock for your specials is coming from.
Staff meals and publicity photos can all be done with surplus stock or even try and find a local charity or soup kitchen who would be grateful for this. Don’t let food hit your waste and don’t let cheap specials waste your reputation.
Outgoing costs
Not every venue operates within the four walls of their own address. Some kitchens ship food outside. This brings up a new range of costs you need to be looking at. The question as to whether these costs should chip away at your gross margin is open for debate. If you sell a uniquely packaged product that has no variation as it leaves the door, then this is fair to add to your food costs. You move a pizza into a box, then there is the cost of that box each time. If you sell mail order, then you are going to have a courier cost for each package. Labels, fuel, taxi costs, bags, napkins, wipes and wrappers all add up.
A simpler way to work this one out is to track your restaurant sales, your takeout sales and any mail order sales as separate revenue lines and then code delivery and packaging costs to each type of sale. None of these have to appear as part of your gross margin, they can at least be split out when you look at the operating costs of your different areas. This creates cost silos, which is not a bad thing, you know where the cash is being spent and on what.
To separate your numbers out in this way allows you to really see where your business is making it’s profits or losses. Once you start looking at restaurant GM v takeaway GM, the restaurant could be making more as they don’t have packaging and delivery to pay for. The reality is that crockery, alcohol licenses, front of house staff, rental on table space etc all should go against your restaurant. If you charge for delivery or for sitting down, this needs to be reflected as revenue or cost reduction in one of the appropriate silo of your business.
Costing outside catering
There are several varieties of outside catering but they generally fall into either a price for the whole service or per head. Whole service is about coming up with a price for everything on the day. A price per head would usually be a whole service price divided by the expected number of guests. Whole service means that you don’t get nobbled for any last minute changes to order quantity in your revenue. Price per head allows the customer to make a comparison against similar suppliers, but you can fix in a condition that the guest count is a fixed quantity.
To help you consider all the areas you may need, there should be a master spreadsheet which contains your price list. Unlike building a menu cost, you are effectively opening a temporary restaurant on site. All the costs involved with this need to be costed and recovered. When the customer gives you a specification to tender against you have to know everything that is required to get the job done. You may also need to phase in the time to arrive / set up and the time to clear up / depart.
It doesn’t matter how simple or complex the event is, the same factors are involved. Each part of your delivery jigsaw needs a cost. Put these items into measurable units that can be multiplied up to give you total cost.
Staff by the hour, but you will also need to include any overtime and breaks in that
Staff meals (each)
Mileage costs
Chafer hire (each)
Linen hire (per piece)
Crockery and silverware hire (per piece or dozen)
Disposable crockery and cutlery
Portable refrigeration
Portable ovens
Portable storage containers
Agency staff
Cooking fuels
Portable bar
Portable service areas
Licenses
Insurance
Point of sale and branding materials (for your own benefit not to build the price)
Costing up equipment for hire could be tricky as this depends entirely on reasonable utilisation.
Building a costing system
There are only two parts to a costing system, a fully written recipe and a master list of components. The master list is fairly straightforward and if fully completed you are in a good place. Putting together the recipe is all about getting a few basic formulas written in a spreadsheet. Really spend your time getting the first line of your first recipe correct and off you go.
For each row you will want the code of the item from the master list and how many units you need in your recipe (wet weight or equivalent). A simple lookup formula will then give you the description, the unit of measure and the cost per unit. Put in a formula to multiply units by cost per unit and you have a total cost for that ingredient. Repeat this down for the whole of the recipe and then put in a sum at the top to add all the totals for each ingredient into a recipe cost. Put a recipe title at the top next to the recipe cost and that’s a wrap.
The final stage would be to put 2 formulae on another page that will be split into course (e.g. starter, menu, dessert) . Only two items would be brought across onto this page, recipe title and cost. That is it, nothing harder than that. If you want to get any more fancy than that, you can add extra formulae for margin, price, trade discounts and an indicator to show if it is live on the current menu. Costs do shift and you can copy and freeze original values to compare against the current position.
Any change in your master list will ripple through the recipe sheet and finally onto the cost card. The cost card will be what is used to build your menu prices. A small word of advice here, all menu items should be included, even drinks. If you don’t want to do that, keep a separate sheet with drinks costs and margins.
All of this sounds a lot simpler than it really is and you don’t need to know it off by heart. This is why sample spreadsheets are available from the online resources.
Cost multipliers for pricing
Now you have got to the point of producing an accurate cost for each menu item. You probably now want to see what you should be charging your customer for each dish or drink. Many sites work on an expected overall margin, which may vary between courses or between bar and kitchen. To get a rough estimate of what an item should be priced at, here is a quick reckoner.
No tax included in menu price:
| Margin | Multiple |
| 50% | X2 |
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