Setting Prices for Your Catering Menu
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Pricing a catering menu is a bit more complicated than pricing a restaurant menu. There are more variables, such as party size, transportation costs, and having to overestimate food quantities. Fortunately, there's more flexibility in catering menu pricing methods. You can assign fixed fees, structure tiered prices based on number of guests, or create custom prices on a case-by-case basis. In addition, catering service fees cover certain costs without excessive markup on food. Even if you won't necessarily offer fixed prices on your catering menu, establish them anyway as a point of reference.
It's standard practice, in both restaurants and catering, to set an item's menu price at 150 to 200 percent higher than its fixed cost. Fixed cost is the cost of an item's ingredients and the time and labor involved in its preparation. The profits may sound high to outsiders, but caterers and restaurateurs know how much of this money goes to covering the many other operational expenses and surprises that go along with the food service industry. There are a number of considerations affecting where on the markup spectrum you set your catering menu prices.
Waste is one factor automatically encouraging menu prices at the higher end of the spectrum. While a restaurant's kitchen typically has multiple opportunities to sell through most food, the same is often not true for caterers. When working off-site, and particularly during buffet-style events, you ideally prepare about 10 percent more food than you estimate is needed. After all, no caterer wants to be known for failing to provide enough food. Catering yields considerable waste that eats away at profit margins, so you must rely on the markup to cover it.
You don't have to be cheaper than the competition. You do need to know what the competition charges for similar food items and how your food and service compare. There's nothing wrong with being more expensive than competitors, as long as the customers get more for their money from you. A caterer, just like a restaurant, can perish, survive, or thrive on word-of-mouth. If you provide the best value for the client's money, people find out. If your business is a great bargain or too expensive for what you provide, word spreads. In any community, people make these determinations based largely on how your business compares to the competition.
In any industry, prices and brand image are entwined. Catering is no different. If you promote your business as an economical way to feed a group, markup at the lowest end of the spectrum is necessary. If you find it's not feasible to do this and still price the same or slightly lower than the competition, you should be marketing yourself around quality rather than price. If you promote your business as a purveyor of fine dining-caliber catering, high prices are expected, and low prices even prompt skepticism among discerning clientele. Markup at or a bit above 200 percent of fixed costs are reasonable. Take a good look at what you provide the customer and the story your product and marketing try to tell, and make sure your catering menu prices fit the image.
Written by: Jon Mohrman