chapter 10
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Chapter 10Pricing Off Premise Events
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Pricing
The “Science” of Pricing – determining the actual costs of goods and labor
The “Art” of Pricing – how much mark up can be successfully negociated
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Market VariablesDetermine how much can be chargedSupply of Caterers in MarketDemand for ServicesTypes of caterers
Market research is key – Analyze clients and their needs
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PricingMany caterers can use pricing as an
effective sales tool
Good pricing is not a “win – lose” but rather a “win – win”
Pricing should take a long term view
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Pricing for ProfitMain goal is to maximize the bottom line while
maintaining the pricing “win win”Find the “middle ground” between good profit
and reasonable pricesAs a rule – 50 – 75 % of proposals should be
acceptedWhen negotiating, try not to lower a price
without reducing something in the event
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Common Cost RangesOf Gross Sales
Food Cost 20 to 40 %Payroll and Benefits 15 to 30 %All other expenses 10 to 30%
Includes “fixed” costs
Net profit before Taxes 10 -40 %
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Prime Cost Prime cost is the sum of the company’s food cost and it’s direct labor costs
Should be no more than 60% of Gross Sales
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How Much will it Cost?Quoting a price without asking qualifying
questions is asking for troubleIf pressed – quote a broad range based on your
previous experience – then proceed to ask for details
Prices that change can create suspicion and animosity
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CostingDevelop Cost Basis lines for
Food CostCommissary Labor CostsAll costs to deliver, set up, serve and clean upEquipment CostsOther costs (Flowers, décor, music)
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Computing Food CostsAccurately estimate the actual cost of the food
necessary to produce the event
Costs are volatile – especially meat and seafood – the so - called “Center of the Plate”
Maintain recipe cards – update with current pricesUse a spread sheet
To price event multiply by number of guests expected (don’t forget planned overages)
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Labor CostsLabor Costs
CommissarySet up and serviceTear down and clean upOffice overhead – sales commissions
Remember to figure in all Benefits and taxes
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Equipment CostsEquipment costs can be structured differentlyOwned equipment can be marked up as if it
were rentalCan use to secure an event Price for profit or discount to underbid competition
Rentals and Mark UpsRental Companies will offer discounts off retailMark ups cover losses and damage
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Accessory ServicesAdd mark up if directly serving as an
intermediary10 to 25 % is common
Commission for a referral? Ethical or Not?
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Calculating MarkupsTwo Methods to calculateDivide the food cost by desired cost percentage
Cost/% = Selling Price
Food Cost Food Cost % Selling Price Margin$1,590 25% $6,360 $4,770
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Calculating MarkupMultiply by Markup FactorFood Cost X Markup Factor = Selling Price
Food Cost Markup Factor Selling Price Margin$1,590 4 $6,360 $4,770
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Pricing LaborSome caterers mark up labor by adding it to the
food cost then applying a markup factorOthers markup food and at labor at cost or
slightly marked up
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Determining the Markup Market Factors Competitor Prices Previous Prices Charged to clients How many Guests are expected How badly is the business needed Other bidders Client’s perceived value of event Do Clients expect to negotiate Clients expecting a discount
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Common Pricing Techniques
Mark up more for smaller partiesMark up more for lower cost partiesMark up more for fewer guestsSpecial Events, or HolidaysProbability of negotiations or discounts Inexpensive parties lead to more inexpensive partiesValue of timeLooking beyond the price
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Service Charges, Gratuities, Sales Taxes
Each State has laws regarding service charges, gratuities and sales taxes
Surveys indicate many caterers do not charge Service Fees and build it into the cost of the event
In Florida, gratuities are not taxed if all monies are given to service personnel
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Charitable EventsKeep RecordsBe Aware of tax implicationsDo not compromise quality – guests will notice Make sure you have proper sales tax exemption
forms
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Other Pricing MethodsBudget Pricing
Client sets the priceCost Plus Method
Calculate costs and add profitRange Pricing
Typically for future events Package Pricing
Can add value
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Next WeekQuiz Chapter 10
Project Due
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