There is less elasticity in this price for lunch meals. That is, there is less room to move in terms of setting prices at lunch time. People traditionally have cheaper alternatives at lunch time, and there are more places open and a greater range of alternatives. This means that management must actively monitor things such as selling price ‘average per cover’, and the prices being charged by their immediate competition in order to determine what a viable selling price is being charged. It is a commonly held theory when pricing meals, that food cost should equal 30% 33% – of the selling price. Cost control The overall objective of any commercial establishment should be to make money which is established by using the following formula: Sales cost of ingredients = gross profit – Sales all costs (wages, cost of ingredients, overheads) = net profit. – Example: XYZ establishment has taken $10,000.00 for one week’s trading, its cost of ingredients was $3,500.00 and overall expenses were $8,500.00. If the above formula was applied to this restaurant, it would look something like this: $10,000.00 $3,500.00 (cost of ingredients) = $6,500.00 (gross profit) – $10,000.00 (sales) $8,500.00 (overall expenses) = $1,500.00 (net profit). – When expressed as a percentage, it would look like this:
There is less elasticity in this price for lunch meals. That is, there is less room to move in terms of setting prices at lunch time. People traditionally have cheaper alternatives at lunch time, and there are more places open and a greater range of alternatives. This means that management must actively monitor things such as ‘average selling price per cover’, and the prices being charged by their immediate competition in order to determine what a viable selling price is being charged. It is a commonly held theory when pricing meals, that food cost should equal 30% – 33% of the selling price. Cost control The overall objective of any commercial establishment should be to make money which is established by using the following formula: Sales – cost of ingredients = gross profit Sales – all costs (wages, cost of ingredients, overheads) = net profit. Example: XYZ establishment has taken $10,000.00 for one week’s trading, its cost of ingredients was $3,500.00 and overall expenses were $8,500.00. If the above formula was applied to this restaurant, it would look something like this: $10,000.00 – $3,500.00 (cost of ingredients) = $6,500.00 (gross profit) $10,000.00 (sales) – $8,500.00 (overall expenses) = $1,500.00 (net profit). When expressed as a percentage, it would look like this:
TM_Design_meals_to_meet_spec_market_req_200713.docx