101 Restaurant Secrets. Ross Inc. Boardman
restaurant on site. All the costs involved with this need to be costed and recovered. When the customer gives you a specification to tender against you have to know everything that is required to get the job done. You may also need to phase in the time to arrive / set up and the time to clear up / depart.
It doesn’t matter how simple or complex the event is, the same factors are involved. Each part of your delivery jigsaw needs a cost. Put these items into measurable units that can be multiplied up to give you total cost.
Staff by the hour, but you will also need to include any overtime and breaks in that
Staff meals (each)
Mileage costs
Chafer hire (each)
Linen hire (per piece)
Crockery and silverware hire (per piece or dozen)
Disposable crockery and cutlery
Portable refrigeration
Portable ovens
Portable storage containers
Agency staff
Cooking fuels
Portable bar
Portable service areas
Licenses
Insurance
Point of sale and branding materials (for your own benefit not to build the price)
Costing up equipment for hire could be tricky as this depends entirely on reasonable utilisation.
Building a costing system
There are only two parts to a costing system, a fully written recipe and a master list of components. The master list is fairly straightforward and if fully completed you are in a good place. Putting together the recipe is all about getting a few basic formulas written in a spreadsheet. Really spend your time getting the first line of your first recipe correct and off you go.
For each row you will want the code of the item from the master list and how many units you need in your recipe (wet weight or equivalent). A simple lookup formula will then give you the description, the unit of measure and the cost per unit. Put in a formula to multiply units by cost per unit and you have a total cost for that ingredient. Repeat this down for the whole of the recipe and then put in a sum at the top to add all the totals for each ingredient into a recipe cost. Put a recipe title at the top next to the recipe cost and that’s a wrap.
The final stage would be to put 2 formulae on another page that will be split into course (e.g. starter, menu, dessert) . Only two items would be brought across onto this page, recipe title and cost. That is it, nothing harder than that. If you want to get any more fancy than that, you can add extra formulae for margin, price, trade discounts and an indicator to show if it is live on the current menu. Costs do shift and you can copy and freeze original values to compare against the current position.
Any change in your master list will ripple through the recipe sheet and finally onto the cost card. The cost card will be what is used to build your menu prices. A small word of advice here, all menu items should be included, even drinks. If you don’t want to do that, keep a separate sheet with drinks costs and margins.
All of this sounds a lot simpler than it really is and you don’t need to know it off by heart. This is why sample spreadsheets are available from the online resources.
Cost multipliers for pricing
Now you have got to the point of producing an accurate cost for each menu item. You probably now want to see what you should be charging your customer for each dish or drink. Many sites work on an expected overall margin, which may vary between courses or between bar and kitchen. To get a rough estimate of what an item should be priced at, here is a quick reckoner.
No tax included in menu price:
| Margin | Multiple |
| 50% | X2 |
| 60% | X2.5 |
| 75% | X4 |
| 80% | X5 |
Tax included in menu price (example done at a 20% rate)
| Margin | Multiple |
| 40% | X2 |
| 60% | X3 |
| 70% | X4 |
| 80% | X6 |
All you do is take your cost and multiply by the figure next to your target margin. The simpler the number the better and there are two ways to do this. Either make the multiple simple or make the margin simple. The purpose of this exercise is to take the numbers away from the spreadsheet and allow for a quick but accurate price to be calculated. This would be the kind of thing you could do for working out how much to charge for specials or for getting a finger in the air feeling for a new dish. With that in mind, make the multiple simple.
| Multiple | Margin at 0% inc tax | Margin at 20% inc tax |
| 2 | 50% | 42% |
| 3 | 67% | 56% |
| 4 | 75% | 63% |
| 5 | 80% | 67% |
| 6 | 83% | 69% |
Before we look at the formula for each, there Is a quick term, food cost percentage or FCP, that needs introducing. The FCP is the part of margin that would add back to 100%, but expressed as a decimal. Eg at 70% margin, FCP is 0.3. Tax is done in a similar way by expressing by example 20% as 1 plus the decimal, 1.2
To calculate multiplier from margin
1
FCP x Tax
To calculate margin from multiplier
1 - 1/FCP
Tax
These are available as a download.
Pricing – other considerations
By now you have put together costs for each item on your menu. You have probably got a feel for what margins you want from your menu overall. So it’s time to start thinking about how you want to price each dish. There are no hard and fast rules here, pricing is an art. There are three considerations that you need to make.
1 Are the prices balanced?
If you charge 2.95 for a soup and 150 for wagyu beef and lobster, then the prices seem out of line. A risk is that you have taken your margins too literally.
Think cash margins and percentage margins. The soup can safely be hiked for a higher percentage whilst the surf and turf can be reduced at the same