Enterprise Insight:
FINANCIAL ANALYSIS Part II: RECIPE COSTING
To run a profitable enterprise, all businesses must control their prime costs. Experience and expertise tells us, all food & beverage and labor costs should be 65% of sales or less in order to achieve profitability. Today, we are going to share with you a few tips on how to start your business with 30% (product) food & beverage costs or less.
First, when embarking on a new enterprise, all businesses must understand how much one portion of each product you sell costs; recipe costing. This includes the raw ingredients to produce that product. Once we get a total recipe cost for each product, the next step is to price your products. Let us say you want to achieve 30% food cost for your business and you are producing and selling sandwiches. After you have done your calculation and have determined one sandwich costs $2.50, there is a simple formula to determine your selling price. $ Food Cost / Food Cost % = $ Selling Price. In our example, to achieve a 30% food cost, we would have to sell our sandwich for $8.33 = ($2.50 / 30% ).
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