Chapter 10
Pricing 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 Variables
 Determine how much can be charged
 Supply of Caterers in Market
 Demand for Services
 Types of caterers
Market research is key – Analyze clients and their needs
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Pricing
 Many 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 Profit
 Main goal is to maximize the bottom line while
maintaining the pricing “win win”
 Find the “middle ground” between good profit and
reasonable prices
 As a rule – 50 – 75 % of proposals should be accepted
 When negotiating, try not to lower a price without
reducing something in the event
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Common Cost Ranges
Of 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 trouble
 If 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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Costing
 Develop Cost Basis lines for
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Food Cost
Commissary Labor Costs
All costs to deliver, set up, serve and clean up
Equipment Costs
Other costs (Flowers, décor, music)
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Computing Food Costs
 Accurately 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 prices
 Use a spread sheet
 To price event multiply by number of guests expected
(don’t forget planned overages)
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Labor Costs
 Labor Costs
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Commissary
Set up and service
Tear down and clean up
Office overhead – sales commissions
Remember to figure in all Benefits and taxes
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Equipment Costs
 Equipment costs can be structured differently
 Owned equipment can be marked up as if it were rental
 Can use to secure an event
 Price for profit or discount to underbid competition
 Rentals and Mark Ups
 Rental Companies will offer discounts off retail
 Mark ups cover losses and damage
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Accessory Services
 Add mark up if directly serving as an
intermediary
 10 to 25 % is common
 Commission for a referral? Ethical or Not?
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Calculating Markups
 Two Methods to calculate
 Divide the food cost by desired cost percentage
Cost/% = Selling Price
Food Cost Food Cost %
$1,590
25%
Selling Price
Margin
$6,360 $4,770
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Calculating Markup
 Multiply by Markup Factor
Food Cost X Markup Factor = Selling Price
Food Cost Markup Factor
$1,590
4
Selling Price
Margin
$6,360 $4,770
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Pricing Labor
 Some caterers mark up labor by adding it to the food
cost then applying a markup factor
 Others 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 parties
 Mark up more for lower cost parties
 Mark up more for fewer guests
 Special Events, or Holidays
 Probability of negotiations or discounts
 Inexpensive parties lead to more inexpensive parties
 Value of time
 Looking 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 Events
 Keep Records
 Be Aware of tax implications
 Do not compromise quality – guests will notice
 Make sure you have proper sales tax exemption forms
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Other Pricing Methods
 Budget Pricing
 Client sets the price
 Cost Plus Method
 Calculate costs and add profit
 Range Pricing
 Typically for future events
 Package Pricing
 Can add value
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Next Week
 Quiz Chapter 10
 Project Due
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