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Permalink Reply by David Fell on September 19, 2009 at 6:41pm

Well, by no means do we have it perfected here, it seems to be a constant struggle for me too. I think one good first step to take is to know how much you have to work with, by that I mean order supplies and food goods based on your average sales income. Here is how Don Eckles of Harvest Roasting puts it "If your sales are $800.00 per day average, and you want your total COG's to be 29%, you know that your limit on spending for cost of goods is $1,624 ( $800.00 x 7 x .29 = $1,624). This formula assumes that your business runs open 7 days a week, if that is not the case than adjust accordingly. Hope this helps.

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Permalink Reply by Jarred Hoffpauir on September 19, 2009 at 9:10pm

One thing I try and get across to my customers is that they should be making product decisions based on how much profit they generate for you in combination with the volume they sell in. I am biased because I sell pancake machines HOWEVER the basics still stand. If you are serving pastries and making a 30% profit because of wastage, delivery cost, and other factors that is simply not enough unless you are selling hundreds per day. We offer an alternative to that with a machine that makes fresh pancakes just as easily and quickly as taking a pastry out of a case. The difference is that the profit margins are between 65 and 80%. There is no wastage and delivery is already built into the price. So even if your volume is only 30 orders per day which is pretty easy to achieve for a semi-busy shop you can add an additional $1000-$1500 per month to what your shop makes.

To me its less about controlling the cost of food which is almost totally out of the shop owners hands and more about controlling how much you are going to make per day and per transaction.

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Permalink Reply by Jay Caragay on September 19, 2009 at 11:24pm

Redonkulus? What do you consider redonkulous?

If you feel uncomfortable charging the higher price, go with lower cost ingredients. If you can't go with lower cost, then maybe it's time to re-evaluate your food program.

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Permalink Reply by Brady on September 20, 2009 at 6:13am

I suspect not, unless you bake your own.

Why not? Non-baking shops are competing against bakery/cafes and shops that use food as loss leaders. Therefore, the market price for a good-quality muffin is at a level where the bakery would see a good margin, but those of us that are just re-sellers will not. So we feel like we have 3 choices: bake our own, "overcharge" vs competitors, or accept a lower margin.

Bottom line, I'm starting to think that if you didn't make or substantially change it, you probably aren't going to get 30% COGS.

On the concept of cost-reducing your baked goods... I'm not sure I see the difference between "overcharging" for a really good muffin vs "overcharging" for a just ok muffin... either way, the customer is paying higher than market price and some will notice.

As a sidebar... I've never understood what the practical difference was between marking up a 50-cent muffin to $1.50 (33% COGS) and marking up a $1 muffin to $2 (50% COGS). Your profit at the end of the week is the same, but you are offering a higher-quality product.

Things we have done to decrease food cost? Focus on waste reduction. If it goes stale before it sells, we drop it. We also have some items that make limited-time, occasional, highly celebrated appearances (the McRib approach) then disappear. Since we don't bake, the anchors of our food program are bagels and sandwiches. Good quality purchased muffins, scones, etc are stocked minimally and almost always sell before staling. We've made big improvements too, and rarely throw any baked goods away.

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Permalink Reply by Sandy Hon on September 28, 2009 at 12:10pm

I echo temp-tamp and would throw out a tip to reduce paper-goods costs vs product costs. You'd be amazed how much you can save per cup/ per napkin/ straw/ whatever. If you have a great product, don't change it- that is what your customers are there for- not for specialty printed paper goods.

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Permalink Reply by ray peck on October 2, 2009 at 12:00am

Negotiate a better deal with your vendors. Raise your prices. Do not tolerate waste. Have products customers want.

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