Are the profits on catering slipping away, or is trading loss increasing?
If you’ve noticed an uptick in catering expenses or a decline in profits over the past six months (despite steady or slightly reduced sales), it’s likely due to escalating catering costs.
While labour costs have been a well-known challenge in the past year, other expenses like power, cleaning, and repairs are also contributing factors. However, the most significant challenge stems from the rising cost of goods. Meat prices have surged by up to 50%, fruits and vegetables by 25%, and dairy by 15% in the last year alone. Coupled with a 25% increase in labour costs over the past two years, maintaining a profitable catering business is proving difficult without adjusting pricing accordingly.
Low margins or losses in catering could become unsustainable, particularly if economic challenges affect overall revenue, compounded by potential decreases in gaming income once the casino launches later this year.
One effective method to ensure your prices are aligning with costs is by reviewing plate and labour expenses. We’ve included a link to a recipe costing sheet for your convenience below.
In our experience at DWS Hospitality Specialists, neglecting a thorough plate cost analysis is a common oversight contributing to catering losses. Additionally, many establishments overlook the inclusion of GST when setting prices. To achieve a 15% profit margin, which often barely covers kitchen overheads, it’s essential to calculate plate costs, labour expenses, desired profit margin, and add GST to determine the appropriate selling price.
For instance, if a plate of fish and chips with salad costs $9.00, plus 50% labour costs ($5.00), 15% profit ($2.00), and GST ($1.50), the retail price should be approximately $18.00. If discounted food is used for promotions, the variance between regular and promotional prices should be recorded as a promotional cost.
While Club and pub meals typically offer lower prices than restaurants, it’s crucial not to under price without tangible benefits.
If you have concerns about kitchen operations or costs, feel free to reach out to the DWS team for assistance.
