Pricing Guidelines for Catering
If you have a knack for cooking and an artsy way of displaying food, catering might be an option for you. The key to your success isn't just about what you put on the plate – it's also about how you price your food so that you can earn a profit. Pricing out your food requires some research. Never price out your menu quickly – if you do, you could be sacrificing profits.
In catering there are typically two types of pricing methods used: tiered and fixed. Both have their advantages and disadvantages. As a caterer, you don’t have to select one or the other – in fact, using both can help increase your profits depending on the number of guests you’re servicing. Fixed pricing involves offering a fixed price per menu item. This is typically done on a per-person or per platter basis: for example, pricing a platter of 20 appetizers or a plate for one entrée. Tiered pricing is based on the guest count. The smaller the guest count, the higher the per-plate or per-person charge is. The higher the guest count, the more is discounted from each price. For example, for 50 people a filet mignon dinner costs $25.00 per person, but for a guest count of 200 it may only cost $18.00 per person.
Markups are what determine how much you profit after food costs. Just as your customers save on the tiered system, you save on food costs, since you can get more items at bulk/warehouse pricing. To determine your markups, set guest count goals – such as one, 20, 50, 100 and 200. Calculate the average cost of food per party size. Caterers commonly use a standardized method that multiplies food costs by three to come at the final menu price; some use a percentage markup method, such as 20 to 40 percent on top of food costs.
Your overhead costs -- for instance, the labor that goes into food preparation -- must be factored into your catering prices. Figure out how many hours it takes you to prepare the food items, set up the site, serve and clean up onsite. Average it out in the same way you average guest counts. If you hire outside help to prepare food, factor in their hourly or salary wages, and include delivery time and costs. If you have to rent equipment -- or example, if you need to rent hot boxes and food storage systems for guest counts over 100 -- factor that into your overhead costs per guest count, as well.
Caterers sometimes charge additional fees based on the type of event. These fees are not factored into the food or menu prices and are presented to the customer separately. These fees can include servers or bussing services, cake cutting fees, rental equipment fees and even delivery charges. You need to fully explain what services are covered under these fees. Caterers sometimes use additional fees to make up for cheaper menu prices so that they can stay competitive.
While making a profit is important, you have to consider how much a customer is willing to pay. If your menu and additional costs are significantly higher than the competition, you need to showcase why customers benefit from paying a higher price – such as offering additional free services, specialty menu items or an especially creative concept. If you’re a highly experienced and educated chef, you may be able to get away with higher pricing than a self-taught caterer. Always check to see how much you profit from each job. While some jobs may be worth your while, if you’re not making enough of a return on your investment, you may need to pass up the job or restructure your pricing.