How To Price Your Food And Make Money

Oota Box

  • Posted 5 years ago
  • Chefs

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You've got a great location, you've got all the permits for your kitchen but what next? Price your food right. However passionate you may be about making or selling food, this is a profit-motivated venture.

Getting your prices right is incredibly important to attract customers and for your business success. It goes without saying that the money you're gonna make is gonna come from your food product and beverages. This makes it all the more important to get your pricing right as a business owner.

Price your food right

Maintain a healthy balance

The key to long term success of any business is maintaining a healthy balance between making profits and giving customers the best price. You don't want to charge your customers exorbitant prices and drive them away. You always have competitors in the food industry and if they offer much better prices for similar products than you, however good your food is, you'll lose out. At the same time, you don't want to charge your customers prices that are too low either. You may attract a lot more customers by doing so but the fixed expenses and additional costs will eat you up. Make sure you can cover all your overhead charges and make a profit of 20 per cent for most of the year. Remember, it can be a seasonal business sometimes, so your prices may fluctuate through the year and so will your profit margin.

Food cost

Food cost is the gross profit you make on each food item or beverage. The price of the dish on the menu minus the price of the actual ingredients used to make it is your food cost. 30 per cent is usually seen as the ideal food cost percentage. This means charging 30 per cent more than it took to make the food or beverage. If you are running a home food business where you don't have a lot of overhead charges you may want to reduce that percentage. Remember, that your customers are not just paying for the ingredients of the food or beverage. The overhead costs are what makes the food prices high. If you don't have a lot of operating expenses and indirect costs, reduce your food costs. This will bring down your menu prices and attract a lot more potential customers.

Get your menu right

Getting your menu right is imperative. When we say this we don't mean just the prices on the menu. Look to have a variety of options on the menu for different taste buds. Make sure you have expensive options as well as inexpensive options on there. Appetizers and desserts are good money makers and have a lot of options for the two. Food markets are seasonal in nature. This inevitably leads to a price increase in certain ingredients during some periods of the year. You cannot make a new menu every time the cost of production goes up. Having a well-balanced menu will help balance that out. Try to include items of different prices with the same dish. e.g. have a good choice of chicken dishes of higher prices as well as chicken dishes of lower prices. History suggests a variety of options leads to better sales.

Reducing costs

Once you've got the menu right and priced it appropriately what you want to do is look to reduce costs. What we mean by this is look to cut down on fixed costs wherever possible. While doing this make sure you don't compromise on quality. Reducing supply chain and production costs are the best way to increase your profits. Ordering raw ingredients in bulk will reduce the purchase price greatly. Producing in bulk will help you reduce your sale price and ultimately the retail price. You will have to project the demand for your food and beverages to do this. This can help greatly in increasing your profit margin. Portion control is another way to ensure a reduction in costs. What this means is if you serve a plate of chicken nuggets, make sure you always serve the same number of nuggets. This gives a sense of consistency.

Getting your menu right and calculating the right price for each item on it is essential. The bottom line is you want your pricing strategies to lead to profits but not to such an extent where it is exploitative in nature. Keeping yourself happy and maintaining quality and hygiene standards should never be compromised to increase profits.

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