Pricing for Profit
To operate a profitable catering business, you need to decide on a price that is appropriate for the services rendered. Determining the costs of catering an event is the most important part of covering your expenses and earning profits. Caterers price their services using different methods. The pricing formula that covers your costs and provides a profit is as follows:
Materials + Overhead + Labor + Profit = Price
Materials include the costs of the food or beverage items. Also, include any shipping and handling costs incurred to acquire these materials.
Overhead costs are the variable and fixed expenses that must be covered to stay in business.
Variable costs are those expenses that fluctuate including vehicle expenses, rental expenses, utility bills and supplies.
Fixed costs include the purchase of equipment, service ware, marketing and advertising, and insurance. After overhead costs are determined, the total overhead costs are divided among the total number of catering jobs expected.
Labor costs include the costs of food preparation and service. To determine labor costs per hour, keep a time log. When placing a value on your time, consider the following:
- Your skill and reputation;
- wages paid by employers for similar skills and
- where you live. Other pricing factors include image, inflation, supply and demand, and competition.
Profit is a desired percentage added to your total costs. You will need to determine the percentage of profit added to each menu item or type of event.
Determining a price is not easy. It is as much an “art” as it is a “science.” There is no one exact price. Base your price on the type of event being catered, special services offered and your competition. When considering your competition, your three pricing choices are to:
- Charge the same as your competition;
- charge more than your competition or
- charge less than your competition. It is important to cover all your costs if you want to stay in business. There are computer programs available to help you price foods and keep financial data for decision-making.
Business Record Keeping
Record keeping is not difficult, but it is important and can be time-consuming. You need to develop a system that helps you keep track of income, expenses, and profit or loss to determine business growth and for tax purposes. Contact a local accountant for assistance in setting up your record keeping system to save time and money later. Additional information on record keeping and taxes is available from BIR.gov.ph website.
To be successful in the catering business, one must produce delicious food that is safe and wholesome. The production of safe foods is your responsibility. Time and temperature abuse of foods contaminated with foodborne pathogens, such as Salmonella, Campylobacter and Escherichia coli O157:H7, will certainly lead to a foodborne outbreak that would likely destroy your reputation and business. Foodborne illness can be avoided if you and your employees follow safe food handling practices.
- Purchase high-quality foods from a reliable vendor. The food should be in good condition with the packaging intact, fresh (not beyond expiration date), and at the proper temperature.
- Store potentially hazardous foods, such as meat, poultry, eggs, milk and fish, immediately in the refrigerator (0 to 4°C) or in the freezer (-20 to -17°C). Dry staples should be stored at 10 to 20°C. Practice First-in-First-Out (FIFO) to insure safety and quality of your menu items.
- Ideally, frozen foods should be thawed in the refrigerator 18 to 24 hours prior to preparation. However, thawing under cold running water (<20°c)
- Cook food thoroughly to the recommended internal temperature for the appropriate amount of time. Meats (including ground beef), fish, shell eggs, and pork should be cooked to 68°C for a minimum of 15 seconds. Poultry should be cooked to 74°C for at least 15 seconds. Cooking times and temperatures for beef roasts will depend upon roast weight and oven type. Use a meat thermometer to measure internal cook temperatures.
- In the catering business, large quantities of food are generally prepared in a central kitchen and distributed to clients. Proper cooling and hot-holding are critical for preventing the growth of possible foodborne pathogens. Hot food may be prepared and distributed in temperature-holding equipment to the client or the food may need to be cooled below 5°C, distributed cold, and reheated. To cool food properly, portion the food in clean, sanitized shallow containers and place in the refrigerator immediately. Make sure the food is covered, dated, and reaches a temperature less than 5°C within a 4-hour period. Also, food may be cooled rapidly by placing on a bed of ice and stirring the food every 15 minutes.
- Hot food for distribution and holding should be held at a minimum temperature of 60°C. Make sure the hot-holding equipment is set to maintain the temperature of the food above 60°C. If the temperature of the food should drop in the danger zone (5 to 60°C) for 2 or more hours, discard. Placing cold food dishes on beds of ice should hold the food below 5°C.
REMEMBER: Keep hot foods “HOT” and cold foods “COLD.”
Reheat all potentially hazardous foods including leftovers to 74°C. Gravy should be heated to a boil (100°C). Discard leftovers stored in the refrigerator beyond 3 days (Gravy 2 days). Leftovers stored in the freezer should be consumed within 4 months.
Practice good personal hygiene when preparing and handling food. Wash hands before food preparation, after handling raw foods, after using the restroom or at any time the hands become soiled. Gloves may be worn when handling and preparing food. However, gloves can become soiled as easily as hands and should be changed often.
Take measures to prevent cross-contamination of food.
- Clean and sanitize food contact surfaces such as counter tops, cutting boards, equipment and utensils. One tablespoon of bleach per gallon of water is an effective sanitizing agent.
- Wash fresh fruit and vegetables thoroughly under cold running water. In refrigerator storage, make sure fresh fruits and vegetables are wrapped or stored in containers separately from raw meats.
- Wear clean clothes and aprons when preparing food.
- Do not use the same towel to wipe food contact surfaces that you use for wiping hands.
- Clean storage and kitchen areas regularly.
- Practice good housekeeping.
- Implement a pest control program for eliminating the spread of disease.
Provide safe food for your clients by following and practicing food safety guidelines. Make sure that you and your employees are current with state and local regulatory requirements for food service establishments. This way you can rest assured that the food you provide to your clients is safe and wholesome.
source: This article is an edited version, download the original at www.ext.vt.edu, photo from scentofgreenbananas.blogspot.com