The formula for COGS is very simple. Knowing your COGS will keep you on top of financials and potential problems, and it wil keep your staff mindful of waste. The only way to ensure it happens regularly is to set up a system. Organize your stockroom, distribute inventory worksheets, and schedule a weekly inventory count and COGS analysis time. Once you know your COGS, you can make sure your prices are higher than your costs. Use it to figure out your food cost percentage, markup, and profit margin—related ways to measure the success of your pricing strategy.
Your food cost percentage is the percentage of sales you spend on food. Setting a target food cost percentage is a very common way to make sure costs are controlled and profits are generated on both single-item and big-picture levels. Food cost, as the name suggests, does not take into account labor or other operational costs. The Best Card Games. The Best Leopard-Print Blanket. The Best Colored Paper Clips.
Skip to content Have you ever wondered how much restaurants are marking up the price of ingredients in your food? Sarah Kuta Sarah Kuta is an award-winning writer and editor based in Colorado. Oddly enough, markup acts as a bit of an equalizer among drinks. It's typically lower for the drinks that have a higher wholesale cost, and higher for those with a lower cost [source: Sherman ].
The markup on alcoholic drinks has grown more pronounced in recent years, as the wholesale prices of many foods have spiked. In many cases, restaurants have opted to give their customers the impression of a deal on food, recouping the loss by raising the price on alcohol [source: USA Today ].
Why not just raise the price of the foods that are getting more expensive? Perceived value plays a big role in how much customers are willing to pay [sources: Bockelman , Mullis].
The ratio between the price of a drink and the price of a meal influences our willingness to buy the drink. We perceive alcohol as a luxury rather than a necessity; we're less likely to object to a high price on a drink than on a sandwich.
Plus, sometimes, if an item seems underpriced, we assume its quality is low [sources: Pizam, Sherman ]. Wines can cost a lot because restaurants don't always buy in bulk, the way retailers do [source: Sherman ].
Sometimes the restaurant ages the wine on the premises, so you're paying for an investment of selection, time and storage. If you buy by the glass, the markup is probably higher, because the restaurant expects some of the bottle to be wasted [source: Gibbons ]. Cocktails and liquor drinks can be especially expensive because, in some states, they require separate licensing [source: Chowhound ]. The decision to maintain a full bar as opposed to a wine cellar is a large up-front expense.
What do these gargantuan markups cover? It costs a bit to train and retain a wait staff that's knowledgeable about wine. A good restaurant likely has specialized glassware -- red wine glasses, white wine glasses, snifters, highball glasses. And as you've probably guessed, it is more expensive to purchase and replace than standard glassware.
The soda fountain can be a huge source of profits for restaurants, particularly those that don't use disposable cups. If you regret overindulging in that chocolate cake, well, at least the wallet in your back pocket is looking less bulky. Desserts are marked up like anything else. The profit markup range averages between 15 and 35 percent in restaurants [source: Pizam ]. It can even go as high as 70 percent [source: Lassen].
You can always expect to pay more if a restaurant has a pastry chef in the kitchen because that means the restaurant has higher labor costs to cover. If on the other hand, the restaurant's desserts come from a supplier, that's a tipoff that you're probably paying excessively. The supplier sells the desserts in bulk, often without setting portion size.
By being able to set portion size, the restaurant has one more way of buying low and selling high. Dessert presentation can be a sneaky way to drive up the price as well. It all goes back to perceived value. If the food is beautifully presented -- say, set on a large white plate adorned with an artful drizzle of chocolate sauce -- you probably feel as though you're getting something special, even though the plating has cost the restaurant mere pennies in ingredients and labor.
Do restaurant markups mean you can't treat yourself every now and then? That's between you, your pocketbook and your waistline.
The price of movie-theater popcorn is notoriously high in proportion to what it costs the theater owner. But there's a reason: movie theaters often don't make much money on ticket sales [source: Gil ]. Ironically enough, the ticket profit margin is especially low for opening weekends of the big-budget "popcorn movies.
Distributors expect to get a lot of bang for their buck from having a big marketing campaign and a huge opening weekend. Another surprising factor in the price? Your car. Shannon Bray's status as a Shiba Inu holder has made him something of an overnight celebrity in crypto circles. With bitcoin and ethereum hovering near all-time highs, many analysts are bullish that the flagship cryptocurrencies, and the crypto space as a whole, can continue its rapid growth and ascension for the remainder of the year.
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Dow 30 36, Nasdaq 15, Russell 2, Crude Oil Gold 1, Silver CMC Crypto 1, FTSE 7, Nikkei 29, Read full article. Last updated: Oct. Brunch Restaurants love brunch. Story continues. Recommended Stories. Motley Fool.
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