There are two metrics of success when it comes to running a food business. The first is being able to satisfy your customers with the delicious food that you serve, and the second is earning a profit. It’s only right that after all the hard work you and your staff put into delighting your customers, you earn what you deserve.
Some might think that one gains profit simply by adding a certain amount on top of just the food cost. However, the culinary team at Unilever Food Solutions disagrees. There is a science behind coming up with your correct selling price in order for you to earn a sufficient amount to keep your business going and to reward yourself. In order to begin, you first need to identify what the potential hidden costs could be.
Managing your food costs
Your computations first need to begin with determining your food cost, which should make up at least 33% of your selling price. Food cost is essentially the amount of money spent on the ingredients needed to come up with a certain dish. Using a recipe cost sheet, you will need to plot out the exact measurements you will be needing to know how much each ingredient will cost you. Doing so allows you to see which ones cost more and which ones cost less. In turn, you will have the opportunity to find alternatives that are potentially more affordable but deliver the same quality.
Consider buying ingredients in bulk or in commercial-sized packs instead of buying them in retail to keep costs down. Stocking up on Knorr Liquid Seasoning in a 3.8L bottle, for example, lets you save up to 20% more than if you were to buy the smaller sizes at your regular supermarket.
Factoring in your utilities
More often than not, those just starting out in the food business completely forget to add in the costs of water, electricity, rent, and other utilities needed for day-to-day operations. These should also be added in order for the bills to pay themselves. It’s best to have some leeway just in case of any emergencies that you will need to spend on.
Compensate for work done
Another element that needs to be part of your selling price calculations should be the labor cost. Especially if you have staff working with you, your selling price should be able to cover the hours they spend in your kitchen. On average, about 17% of your initial food cost is what you can consider your labor cost.
Pricing that's profitable
When calculating how much you should charge your customers for your dishes, use you could scan the market to see how much similar ones are selling for. This could also depend on the kind of market that you want to tap. If you’re planning to sell to students, you might want to limit your added profit. But if you are selling to a higher-end market, you can allow yourself to add a bit more to give your dish a sense of exclusivity. Just remember that no matter how much you decide to add, that margin should soley be for earning purposes!
To make sure your pricing is both fair for your customers and profitable for you, consider taking a crash course on how to use Excel for business. You can also choose to invest in software like CalcMenu that would help you organize and manage your recipes and costs more efficiently.
Choose your packaging wisely
The way your dish is presented also determines how much your selling price should be. This also goes back to knowing who your market is. You can keep it simple with beautiful low-cost packaging, or if you are going for the higherend market, opt to use extravagant boxes and bows that could bloat your cost tremendously. But just like sourcing out ingredients, when you buy your packaging materials in bulk, you get to pay discounted wholesale prices for them.
Make safety a priority
The COVID-19 pandemic has made all of us rethink our priorities. While sanitation and disinfection were always part of the computation for utilities, they are now in a category all their own. Today, food establishments are required to invest in the proper tools needed–from purchasing more disinfectants to sanitize tables and chairs after each turnover to installing acrylic barriers for each table. Giving customers the safest possible environment they can eat in is the new standard.
Make sure you regularly schedule deep cleaning of all areas! Cleaning service rates can range from ₱60-65 per square meter of commercial space with a minimal additional fee for microbe protection, while upholstery and dining chair shampoo and vacuum services will cost you around ₱400 per seat.
Promote your business
An obvious way to earn more profit is to reel in more customers. But that, too, comes with cost implications. Whether you’re going the traditional route and distributing flyers or going online and boosting ads on social media, you will need to set aside a budget just for marketing purposes.
If you don’t have the luxury of spending too much on a shotgun approach, study your target market and see where you believe they would be able to see your ads best. Choosing the right platforms or channels and making sure you talk to the right audiences can save you a lot of costs. At the same time, there’s a greater chance for the eyeballs to turn into paying customers! If your customers are mostly students and teens, then Tiktok is the platform for you. If most of your patrons are young professionals, then a highly visual, carefully curated Instagram feed is your best bet. And for older customers, you can never go wrong with using Facebook to increase your reach.
Set aside an emergency fund
With all that’s going on in the world, it’s hard to tell what curveball could come next. Having an emergency fund saves you from having to dig into your profit to pay for any unforeseen expenses. For online, home-based food businesses, consider saving ₱100,000-₱300,000 for a rainy day. For food stalls and small-to-medium restaurants, ₱1 million is a good place to start. In general, a good practice is to set aside funds equivalent to 6 months' worth of full operating costs plus estimated monthly fixed costs (35% of projected monthly sales).
Once you do earn a nice profit and have extra funds to spare, there are some other nice-to-haves that you can take a look into. The following can boost your knowledge and the morale of your staff, resulting in even better business for you.
Invest in learning
As your business grows, so should you. Learning new techniques and exposing yourself to different types of food definitely gives you new ideas to improve your business even more. Whether it’s taking free lessons by Unilever Food Solutions, buying tickets to food-related expos, or traveling to get a taste of different cuisines, consider these learning experiences that bring your food business to new heights.
As a food business owner, you don’t have to do this on your own as well. It’s also ideal that you expose your staff so they can see what’s trending and what the standards are at other restaurants. Together with our professional culinary team, we have put together a collection of courses and workshops that you and your staff will surely find useful. Visit UFS Academy to unlock more skills.
Allow yourselves to celebrate
Rewarding your staff once in a while is also rewarding for your business. Factor this into your budget when you can. According to Chef Brando, "Your best resource is your human resource. Take care of your staff and always let them know how grateful you are for the hard work that they put in. If your funds allow it, add a little bonus to their paycheck, take them out, or if you’re feeling lavish, you could even throw a thanksgiving party just for them! Remember that an appreciated employee is a happy one!"
Now that you have all the pointers you need to make sure you earn a profit, it’s time to get down to business. Take a look at each of the considerations mentioned above to see how you can improve your business and make it profitable for sure. These cost considerations are vital in making sure your business stays afloat no matter what. They'll protect you, your staff, and your business.
Unilever Food Solutions offers commercial-sized products from well-loved brands like Knorr Professional and Lady's Choice. But apart from offering ingredients, the website contains helpful resources and recipes that food businesses of all sizes can learn from. You can also subscribe to the Unilever Food Solutions newsletter for industry-related content to be sent straight to your inbox.