One of the biggest tasks when it comes to opening a catering business is setting the price for the menu. These prices should cover the money spent on food as well as the cost of labor, time and travel. By setting the right prices, it enables your business to turn a profit while also competing with the competition. Pricing is very critical in any business mainly because this is the first thing customers look into in their purchasing decisions.
Here are 5 ways on how to put the right prices on your catering menu and budget your catering business effectively.
- Choose a pricing system for your menu and services. There are three common pricing system that most catering companies use. One of the common pricing systems is called fixed pricing. It is a system in which each item on the menu has a fixed cost and quantity. Another is called the tiered pricing. It is a system in which the price per person goes down the higher the total guest count goes up. This is commonly used for buffets and for those serving in seated meals with individual plates and pre-determined portions. There is also custom pricing where you create a custom quote for each customer based on their needs and your costs. Understand each method and try to choose the system that you think will best benefit your business. Weigh the pros and cons of each method and make sure to conduct some basic research on these methods to familiarize yourself with them.
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- Determine the markup (how much extra you will charge customers in addition to the costs of ingredients) for your menu to ensure that you get the costs of preparing the food and the cost of preparing and labor. Giving a high markup will ensure the business turns a profit but bear in mind that too high of a markup can lose potential customers looking to save money. The suggested markup is three times the price of the actual food costs.
- Decide if you want to include any extra fees in the menu pricing. These include fees from delivery, cake cutting or setup/takedown. However, if you choose to add additional fees for these services, you need to make sure that these fees are outlined in the menu and in any contracts prepared with the clients.
- Create a draft of the catering menu. Keep it detailed as much as possible.
- Try to research the rates of other catering companies near your area and compare the prices to yours. As much as possible, try to compare a similar menu. This is to make the necessary adjustments in the prices of the menu. This is also to make sure you are able to compete with other companies. You may need to lower the rates slightly, remove some additional fees or you can include a free service with the menu to attract customers to use the services of the company over the competitors with similar or lower prices.
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