The Catering Coach
Price It Right
Have you ever wondered if you’re pricing your catering proposals correctly? Is it possible to make more money? I know I wasn’t doing it right and it cost me. Let me show you what took me too long to learn myself.
Let’s pretend we’ve been asked to cater a five-hour event in someone’s backyard for 150 people. You are providing everything, including the staff, except for the alcohol.
Never send all-inclusive pricing. It does nothing to show the client the value you bring and the cost for all the things they are asking you to do for their convenience and ensures nothing is left out.
Now, let’s price this event right! Here are the components for our cost breakdown:
• Food Experience
150 guests @ $X per person
150 desserts @ $X per person
Combine ALL of the costs of the accurately updated recipes that you will use for the menu EXCEPT for dessert. Take the cost of goods sold (COGS) and multiply by 3.5 to set your profit margin (the standard is 3 times, and you can even multiply by 4 or 5 times during high-demand periods to maximize profits during the busiest times if your market can bear it). Let’s suppose the COGS is $800. Multiplying $800 by 3.5 = $2,800. Divide $2,800 by 150 guests = $18.66.
If the dessert COGS is $174, then multiply 174 x 3.5 = $609. Divide $609 by 150 = $4.06. Profit to the company for food is $2,425.
Many business owners stop there, but there’s more.
Why do you charge for staff? Think about it.
• Who finds the staff?
• Who pays the staff’s payroll taxes?
• Who pays for the insurance to cover damage at a client’s home?
• Who trains the staff?
• Who spends time contacting the staff to inform them about the event?
YOU do. Don’t let the profit you are making on the food cost cover the cost of that staff.
To determine what to pay your staff, find out the average cost of waitstaff for your area of the country. In many parts of the county, it is at least $25/hour per staff person. Make a profit PER HOUR on each of your staff members and mark up what you pay by at least $5 per hour per staff person. Remember, you have to match payroll taxes and expenses from each check plus make a profit.
The minimum each staff person should be paid is four hours per event. Also, figure in the staff time a minimum of two hours prior to event start time for set up. Don’t let the client talk you into a one hour set up. Your presentation and food will not be the same if you are rushed. Many times it takes 30 minutes just to unload the delivery van and get everything to the event room.
Also, figure one hour after the event ends for clean up. Clean up is CRITICAL! If the place is left a wreck, you will not be hired again.
For our sample event, I have charged $31/hour per staff person and also allowed one waiter/kitchen staff per 50 people since this is a casual event with an easy menu. The staff is paid $20/hour.
Two kitchen (5 p.m.–12 a.m.) $496
Waiter (6 p.m.–12 a.m.) $186
Bartender (5:30 p.m.–12 a.m.) $201
Profit to the company for the staff: $274
If your company is providing the platters, chafers, paella pans, table top griddles, serving utensils, etc., for this event, you must charge for these items. They are rentals from your company. Profit to the company for rentals is $110.
For some reason, charging for the disposable items is difficult for many caterers, especially restaurant owners. Remember: this is not an event at your restaurant where the client is seated and served at your table. I prefer to line item the cost of the disposables, but you could wrap it into your food costs. In the end, it doesn’t matter how it’s done, just get it paid for by the client.
For our 150-guest party, we will need two plates, one fork, three cocktail napkins and conservatively two-and-a-half cups per person, which is $1.26 per person. Double the cost of this when charging it to the customer. Profit to the company for disposables is $223.
Client pays $5,200 total after tax. Profit to your company $3,032. That’s a profit that reflects what your food and service are worth!
What I have written in this article is the MINIMUM profit that should be proposed for this sample event. There are more items like service fees or production fees which are at the discretion of the caterer. My company always charges a production fee of 18 percent. There is value in what you do and people are willing to pay for it!