Hosting events, whether at your restaurant or a secondary location, is a great business. It increases exposure and improves profits. However, creating custom menus for events involves a lot of work.
Pricing your menu wrong or overlooking miscellaneous costs can turn a great business venture into a great revenue loss. Â
To price your menu correctly i.e. in a way that covers all your catering costs and turns a profit requires some forethought. Here is how to price your event's menu and everything you need to consider when settling on your final menu prices.
Top Tips:Â Pricing an Event Menu
Determine the Food Cost Percentage
Pricing event menu items to cover all catering costs requires some mathematics. Luckily, it’s nothing too difficult.
First, we’ll determine the Food Cost Percentage (FCP) of the menu items. The FCP is the percentage difference between the cost your restaurant spends on event food and the return you get on your menu items.
A successful restaurant's FCP ranges between 28 % and 32 %, with high-end places reaching 40 %.
The formula goes as follows:
Cost Of Ingredients Ă· Food Sale Price = Food Cost Percentage
Let’s say you are selling a food truck dish at an event for $18, and it costs $5.50 to make the dish.
Let’s plug the numbers into the formula: $5.50 ÷ $18 = 30.5%
You are in the ideal FCP zone.
If the FCP is too low, you have to up the price of your menu items or lower the cost of the ingredients. And if your FCP is too high, make sure it fits with the event.
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Are you a hosting premium, private event and bringing in a private chef? If not, lower your costs to a more reasonable FCP.
You need to repeat this step with every item on the menu to ensure the pricing structure makes sense for each item and is fair to customers.
Once you are done with the individual food costs, you can also tally up the entire event menu and see if the FCP still falls within the ideal range.
Cost Per Person and Tiered Pricing Options
The above equation is often used in restaurants and works for private events where people are paying for their meals like they would at a normal restaurant.
However, it isn’t the only popular pricing structure for determining the right catering cost.
Cost Per Person
First, you can charge per person. The cost will vary depending on the event type and the food you’ll be serving. Traditionally, per-person catering services cover the cost of an appetizer, a plated dinner with 5 ounces of meat, two medium or three small side dishes, and one dessert per person.
If the event is hosting children, you can count the children as half a per-person serving.
To determine the cost per person, add up all the food costs and divide it by how many people, or “heads” are going to be at the event. This will show the cost of food per person, and be your starting point when determining your markup in the next section.
Tiered Pricing
Next, we have tiered pricing, which is most seen at buffet-style events. Because buffet-style events work in bulk, you can feed more people for less. Buffets are a great way to lower catering costs and entrance fees for attendees.
As a general rule, the more people are attending, the less the cost per person at the event is.
You can use the above cost-per-person calculation with tiered pricing, as well as the FCP calculation to ensure you are staying within the ideal FCP range.
Determine the Catering Costs Markup
If your markup and FCP are good, you’ll see a better return on your events.
Generally, catering per person markup is three times the food costs. If you are paying $7 to make a dish, you need to charge about $21 to be in a good markup range. This should cover all the costs associated with the event.
For buffets, this is a little different. Because they don’t rely on physical labor and produce high food volumes for cheaper, markup can be tricky to determine. Some buffets easily make 100% back on their food costs.
Use the FCP formula to determine if you are within the ideal range, and compare it to how many heads are going to be at the event. The more people there are, the lower your initial costs are going to be, and the more you can charge for markup.
Catering Service Costs
Catering service costs are going to have a massive impact on the final price on your menu. If the markup doesn’t cover all the catering costs and produce profit, you need to adjust it so that it does.
Here are some things that will affect catering costs, which you should factor in when deciding on the final menu prices.
- Venue & Equipment Costs: Are you hosting the event at your restaurant or a secondary location? Do you need to rent more space? What equipment do you need to rent? These are just some of the things to consider when determining your menu items and catering prices.
- Labor: If you are hosting a traditional sit-down meal, you will need to hire servers or bring in your restaurant servers to work the event. You’ll also need kitchen staff and busboys to keep the venue clean.
- Set Up & Take Down Fees: These are fees charged for any party prep you and your staff do for the client.
- Travel Fees: If you need to travel for the event, be sure to factor in gas and labor costs for the travel.
If you are coming out of the event with a net profit of 7% to 8%, then you are doing good. If it’s lower, you will have to bring up the food menu pricing.
Compare With Competitor's Catering Prices
Whether you are new to the event industry or trying to improve revenue, your competitors are a great place to learn. By studying your competitors, especially the ones that are doing well, you can see what clients want.
Most notably, pricing. Compare your event menu pricing with that of your closest competitors. What is their per-person average cost? Do they offer discounted rates for large events or specific foods? How does their pricing compare to yours?
You don’t need to change your event pricing to match those of your competitors. However, you can use it to see if you are missing the mark. Maybe you are charging too much. Maybe you’re not offering enough incentives.
Use the analysis to make yourself offer competitive pricing clients can’t ignore.
Factor In Demand Pricing For Speciality Items
Hors d’oeuvres and specialty items like lobster, caviar, etc., are items you can charge more than traditional markup value for. Because these items are hard to get and the people who purchase them are looking for a premium experience, you can charge high-end FCP, between 40% and 50% percent.
Mix Affordable and Premium Options
As good as specialty items are for restaurants and events, they shouldn’t be the only option on your menu. It would exclude people from your events and work out more expensive for you.
Instead, create a menu with a mix of expensive and affordable items. Be aware of dietary restrictions and offer options for all guests.
This is going to lower food waste, which has cost businesses $2 billion in recent years. Offering a variety of menu items is also going to make your business more accessible and increase the volume of clients–which will naturally increase profits.
Take Advantage of Restaurant Software
Lastly, simplify catering services and events menu pricing by taking advantage of restaurant software. Technology in restaurants continues to evolve, changing the business of food and opening up the way things are managed.
Today, events management software and dedicated catering software offer streamlined solutions to some of the most difficult catering processes. Use software to streamline your catering operations, reduce labor costs, and reduce human error.
Conclusion
Private events are a great way to increase your restaurant's revenue and generate exposure. And while hosting events can be a tad overwhelming at first, it can be done well once you get the hang of a view of key points.
One of the most difficult aspects is determining the food pricing on your event menu. Fortunately, with FCP and markup calculations, competitor analysis, and restaurant software, you can create a reasonable menu that’s competitive and comfortably covers the event costs.
Take your planning one step further and save money with Perfect Venue. Give our free trial a go and experience the power of event management software.
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