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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