Coming up with a food menu in your bar can be exciting, but setting prices is a balancing act.
You need to account for the costs involved with providing food to customers, and it’s vital you consider absolutely every ingredient that goes into your dishes.
Once you know your costs, you need to know how much to sell it for. This will determine your gross profit margin and ultimately the success of your establishment.
Typically, if you have a gross profit margin anywhere north of 60%, it’s safe to say your bar or restaurant will be thriving.
Jamie’s Italian on Park Street, Soul Fish on Gloucester Road and the Rose of Denmark – home to Hotwells’ best Sunday roast – have already shut up shop in 2018.
With that in mind, here are some tips to avoid falling on the same sword.
How much should be charged for food?
You need to consider the costs involved with sourcing ingredients as well as paying staff to prepare your dishes, cook them, serve them and possibly wash up afterwards.
To calculate the minimum price you need to sell a dish at, divide the costs by your target food cost percentage.
For instance, the ingredients of a Cornish lobster main course may cost you £6 and your target food cost is 30%.
The calculation would be £6 divided by 0.30, which gives a minimum sale price of £20.
To work out your gross profit, you deduct the costs (£6) from the sale price (£20), which gives you a gross profit of £14 in this example.
Can software keep track of food prices?
When it comes to pricing up your menu, you need to weigh up how much your ingredients and overheads cost, while remaining competitive with your local rivals.
Returning to the Cornish lobster example, selling your dish for £20 would be around a third cheaper than the same dish on offer in one of Rick Stein’s restaurants.
Pricing some items cheaply can bring in new customers, but you would be jeopardising your business’ long-term future if you lose track of costs after setting your food prices too low.
Xero online accounting software can make this task easier as you can create reports to estimate meal prices on a regular basis.
“Using Xero gives me a much more up-to-date picture of my business finances. This in turn makes forecasting and planning much easier and enables me to keep on top of targets and monitor progress. Having experts at Evans & Partners on tap to help me is great.” J Rolfe, Cactus.
With these numbers at your disposal, you will be in the best position to assess your competition and make informed decisions for food prices on your menu.
Can we help?
Being Xero platinum partners means we go beyond the numbers and can assist you with all aspects of running your business in the food and drink industry.
Get in touch to see how we can help you boost your profit margins.