Is your food concession business serving long lines of customers at busy events but you are not seeing much profit? It’s possible your menu is not priced correctly. By using the correct formula to find the right price point for your product you will avoid selling yourself short.
Unlike conventional small food service business operators, whose expenses and operating costs remain fairly consistent, concessionaires are faced with variable business expenses and operating costs – costs that are typically higher than non-concession small food businesses. Additionally, because the concession business is part-time and seasonal, enough revenue also must be generated to cover the concession operation during its down time. Therefore, it is important to price your menu high enough to cover variable costs and expenses that are hard to foresee and pre-determine.
Whether you are in the planning stage of finding the right menu with which to start your concession, or, are already serving your menu at events, here are some tips to price your menu correctly. Get out your paper and pencil.
- Break down each dish on your menu into individual ingredients, and cooking and serving products. For example: A concessionaire who serves corn dogs should also account for the cost of frying oil, ketchup, mustard, napkins, and a serving tissue.
- At your supplier list the wholesale price of each item as purchased in quantity. For example: A case of corn dogs might cost $24 dollars, a five gallon jug of cooking oil costs $28, a #10 can of ketchup costs $3.60, a one gallon jug of mustard costs $5.60, a pack of napkins costs $7.19, and a pack of serving tissues costs $15.67.
- Measure or weight a serving size of each ingredient in the dish.
- Now do the math to find the price of each ingredient and product in each dish. When broken down the cost per serving looks like this:
Corn Dogs: $24 per case of 72 = 0.33 each.
Frying oil: $28 per 5 gallons = 0.17 (I arrived at this hard to determine figure by dividing by 1000 servings, which is the minimum number of corn dogs I would expect to cook with this oil)
Ketchup: $3.60 per #10 can = .01 (again divided by 1000 servings per can)
Mustard: $5.60 per 1 gallon = .03 (customers usually use more mustard than ketchup on a corn dog so I divided by 200)
Napkins: $7.19 per pack of 500 = .01 each.
Tissues: $15.67 per pack of 1000 = .02 each.
- Now add together each item in a serving. In the example the total cost of serving a corn dog is: $0.57. By dividing the total cost of a serving into your selling price you learn your profit margin. For example: if you sell a corn dog with a total cost of .57 cents for $3 your cost ratio would be 19% of the selling price (.57 divided by 3.), therefore your profit margin is 81% and within the range of profitability.
If, like most concessionaires, you offer more than one item on your menu, some dishes may be more profitable than others. Then, the average profit margin of your entire menu is the rule. For example: Some dishes might have a margin of 77% while others might be as high as 83%. Here, providing, on average, all dishes sell equally well, then your profit margin remains at 80%.
This is important. When a food concession business sells food at 80% profit and keeps additional operating costs and general business expenses, such as, space fees, wages, licenses, insurance, fuel, and maintenance under 30%, half of sales earned over the season will be profit.