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Permalink Reply by Brady on November 10, 2012 at 5:03am

Others will surely jump in on this with more relevant ideas (I've been out of that side of things for a while) but here's some thoughts I have on the matter.

For your core products, like coffee, price as-needed to achieve your cost targets. If you are sourcing a premium product, you can't really charge discount prices.

If you feel like your roaster isn't pricing competitively, it never hurts to discuss the matter with them. I'm also a fan of having an idea of who else might be able to supply you with similar-quality coffee. The roaster landscape is always changing, and it's good to know who is out there.

Evaluate your waste, it can be a huge cost component. Revisit your processes and practices to make sure you are doing everything you can to minimize waste without compromising product quality. Food staling waste, drip coffee waste, and milk waste on the espresso bar can be substantial.

Take milk waste as an example. I sometimes see baristas miss the mark by 4+oz of milk. Waste to that degree increases the cost of that 12oz drink by 20-30%. Barista training can help bring that kind of waste in line.

Watch out for cafe convenience products. Things like drink mixes (frozen, chai, etc) those pre-portioned oatmeal cups, etc. Those probably have your lowest margins. Evaluate them to see which can be eliminated and which you can make yourself. Bringing things like that in-house can substantially reduce your costs, improve your product quality, and create a differentiation point for your shop. These things also help you utilize the excess labor that may otherwise be standing around texting their friends on a slow afternoon.

Oatmeal is a fun example. You can buy one pound of Quaker Quick Oats at the store for $2, which is about the same price you may pay for ONE 2.7oz premade cup from your coffee products supplier. Obviously there's packaging cost, plus the cost of a handful of dried fruit or nuts... but you get the idea.

It always pays to price-shop for things you absolutely must buy. Prices can vary pretty wildly. If you're having stuff delivered by a company (milk, paper, etc) check the prices against those at your local restaurant supply or warehouse store. The convenience of delivery is great, but make sure you know how much that convenience is costing you (especially as so many are adding fuel surcharges).

Hope that's helpful.

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Permalink Reply by Mike McGinness on November 10, 2012 at 2:30pm

Brady makes some good points especially on managing waste. My question is "who is your competition and what is your focus"?.  If you're trying to compete on price offering similar offerings to chains like Charbucks you loose period. You cannot compete on price and win, they have massive buying power and advertising $.

 

On the other hand if you compete on quality price accordingly. We don't carry a bunch of syrups (two both made in house), make our own chocolate sauce (because it tastes mucho better though costs way more than Hersheys or Toranis or Divinci etc.), don't even have a blender, and don't pre-brew coffee of any kind -  every cup is manual brewed just for you not just espresso based. For instance no cheapo cup of coffee like those competing on price- our 8oz manual brew cup is $2.50 12oz $2.75 16oz $3. That's right $3 for "a cup of coffee" not a latte etc. Usually from a choice of 4 to 6 different coffees. Free refills? Nope. And business our main location October 2012 versus October 2011 up 32.6% and up from October 2010 a whopping 95.5%. (Made major management change beginning of March 2011)

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Permalink Reply by Donna Catherine Gagne on November 15, 2012 at 3:35pm

Thanx for all the input.  I am a government contractor, on a military installation.  We have what I call "grab and go" service.  In other words, not as technical or fancy as hand made sauces and french presses.  I buy everything myself.  No distributors. I get my beans from a local roaster, excellent product.  I am required by contract to be 10% below the local market.  I believe that I am already getting my stuff at the best price possible.  I know waste can be costly!!  I think at this point, I would like to evaluate my processes.  I am curious about the homemade sauces that you mentioned?  How do you do that?

 
Mike McGinness said:

Brady makes some good points especially on managing waste. My question is "who is your competition and what is your focus"?.  If you're trying to compete on price offering similar offerings to chains like Charbucks you loose period. You cannot compete on price and win, they have massive buying power and advertising $.

 

On the other hand if you compete on quality price accordingly. We don't carry a bunch of syrups (two both made in house), make our own chocolate sauce (because it tastes mucho better though costs way more than Hersheys or Toranis or Divinci etc.), don't even have a blender, and don't pre-brew coffee of any kind -  every cup is manual brewed just for you not just espresso based. For instance no cheapo cup of coffee like those competing on price- our 8oz manual brew cup is $2.50 12oz $2.75 16oz $3. That's right $3 for "a cup of coffee" not a latte etc. Usually from a choice of 4 to 6 different coffees. Free refills? Nope. And business our main location October 2012 versus October 2011 up 32.6% and up from October 2010 a whopping 95.5%. (Made major management change beginning of March 2011)

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Permalink Reply by Jay Caragay on November 16, 2012 at 6:53am

If you're required by your contract to be 10% lower than the local market, what is the "local market" pricing? And can you actually survive at that pricing level?  

The one thing that I have learned (sometimes the hard way) over the years is that you must respect your margins. To do otherwise ensures financial ruin.

Look very seriously and coldly at your numbers. Evaluate your true costs and the amount you need to charge to cover your costs, operate the business and give you a lifestyle. Then see how that price fits within the terms of your contract.  If you need to charge more than your contract stipulates, renegotiate.  If you cannot, then consider closing immediately. Do not place yourself into greater debt and financial jeopardy and find another location to operate.

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Permalink Reply by Mike McGinness on November 16, 2012 at 1:29pm

I was trying to figure out a reply with the new information given and you nailed it.

Jay Caragay said:

If you're required by your contract to be 10% lower than the local market, what is the "local market" pricing? And can you actually survive at that pricing level?  

The one thing that I have learned (sometimes the hard way) over the years is that you must respect your margins. To do otherwise ensures financial ruin.

Look very seriously and coldly at your numbers. Evaluate your true costs and the amount you need to charge to cover your costs, operate the business and give you a lifestyle. Then see how that price fits within the terms of your contract.  If you need to charge more than your contract stipulates, renegotiate.  If you cannot, then consider closing immediately. Do not place yourself into greater debt and financial jeopardy and find another location to operate.

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