# Need help/advice with menu costing



## kevin james (Sep 30, 2019)

As the threads title suggests, I'm looking for some very general help with menu costing. This is for an idea I had to turn my smoking hobby into a _very_ small business. It's not for catering, but something different all together and would again start out very small.

Basically my idea stems from the fact that I have coworkers, friends, neighbors etc. that have all taken an interest in my BBQ and have expressed interest in having me smoke some meat for them. So I thought of putting together a menu where they could put in orders for what they want, then I would buy everything, prep it, smoke it, and package it for them with heating instructions. Kind of similar to something  like this: https://www.corkysbbq.com/shop-online, although their prices seem insane to me.

I have heard menu prices should generally be 3x your food costs, but not really sure if that means 3x the cost of just the main item, or add the cost of _everything_ required together and price at 3x that number, which would seem to get overly expensive quickly. I'm also struggling with how to account for certain costs like spices for the rubs and sauces. For example if you buy big 16 oz bottles, I would have no idea how to estimate the cost per food item as each bottle of spices will last for several separate cooks. I know obviously costs for items like that would need to be prorated, but I have no idea how many racks of ribs (or pork butts or whatever) a 16 oz. bottle of black pepper for example is going to get me through. Even though things like spices, foil and other items are really a part of your cost of goods sold, is it easier and common practice to classify them as part of your general operating expenses?

I'm a commercial loan underwriter by profession and I analyze financial statements all day every day so I have a very good understanding of revenues, costs, expenses and margins.  I'm really just trying to find a happy balance between making sure it is a profitable venture, and also making sure the price is not so high as to be a turn off etc.

If I use a rack of spare ribs and a bottle of sauce as an example, I generally pay about $10 -$11 per rack, and a bottle of sauce probably costs me about $3-$4 to make. At 3x the food cost the price would be would be $30-$32 for the rack of ribs and $9-$12 for the bottle of sauce. I guess my issue is that at $32 for the rack of spares, it seems to be riding the line of priced to highly, and $12 for a jar of sauce seems really high when they can go to the store and buy a big bottle of their favorite sauce for much less. The sauce is just expensive to make due to the high cost of some ingredients.

These prices above also only account for 3x the cost of the actual main food item itself, the rack of ribs itself for example, or the ketchup base for the sauce, and don't take other costs into consideration such as fuel for the smoker, other ingredients such as the spices for the rubs and sauces, my time.

Anyways, sorry for the long post. I'm just looking for some general guidance to see if this idea even has legs...


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## kruizer (Sep 30, 2019)

The rule of thumb is 25% food cost and the balance in prep and wages


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## kevin james (Sep 30, 2019)

kruizer said:


> The rule of thumb is 25% food cost and the balance in prep and wages



Ok, so for example, if a rack of spares costs me $10, I should charge $40 which already factors in prep items like spices and other small ingrediants. Is that what you mean?


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## Central PA Cowboy (Sep 30, 2019)

No way would I pay $40 for a rack of ribs when I can get steak and lobster with sides for the same price.


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## kevin james (Sep 30, 2019)

Derek717 said:


> No way would I pay $40 for a rack of ribs when I can get steak and lobster with sides for the same price.



I totally agree... I wouldn't pay $40 for a rack of ribs either. That is why I'm trying to figure out costing to see if this idea even has legs. No point in doing it at all if it's not profitable, but if it's too difficult to make it profitable, it's not worth pursuing lol.

The main problem is this business/project whatever you want to call it would start off way to small to buy food in enough bulk to get my costs down too much. So I guess I would have to factor in a higher percentage of sales price for food cost, and thus smaller margins or the idea probably won't work at all. Oh well... it's just an idea anyways. Not all ideas are doable in the end.


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## smokin peachey (Sep 30, 2019)

The problem is you are paying to much for the rack of ribs when you buy them originally. You have to find a cheap supply of quality meat like US Foods or another restaurant supply company and buy in bulk.
If people are willing to pay $20 for a rack of your ribs you need to find a supplier of ribs that cost $5.

How big is your smoker and have you checked regulations in your area?


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## kevin james (Sep 30, 2019)

smokin peachey said:


> The problem is you are paying to much for the rack of ribs when you buy them originally. You have to find a cheap supply of quality meat like US Foods or another restaurant supply company and buy in bulk.
> If people are willing to pay $20 for a rack of your ribs you need to find a supplier of ribs that cost $5.
> 
> How big is your smoker and have you checked regulations in your area?



I agree with you that the problem is my cost is to high. As I mentioned above, this would start out too small to buy in bulk. I will look into it, but probably not doable.... at least for now.


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## smokin peachey (Sep 30, 2019)

kevin james said:


> I agree with you that the problem is my cost is to high. As I mentioned above, this would start out too small to buy in bulk. I will look into it, but probably not doable.... at least for now.


Do you have a Costco or Sams Club in your area?


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## kevin james (Sep 30, 2019)

smokin peachey said:


> Do you have a Costco or Sams Club in your area?



Yes, I just got a Costco membership in the last month.


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## smokin peachey (Sep 30, 2019)

kevin james said:


> Yes, I just got a Costco membership in the last month.



They might have cheaper pricing if you buy a case.


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## kevin james (Sep 30, 2019)

smokin peachey said:


> They might have cheaper pricing if you buy a case.



I'll look into that. Thanks.


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## smokin peachey (Sep 30, 2019)

kevin james said:


> I'll look into that. Thanks.



You mentioned you are a loan underwriter. Have you helped anyone start a restaurant? Could you go to them and see if they could order what you need using there account with a bulk food supplier?


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## clifish (Sep 30, 2019)

do you have a restaurant depot near you?  there are several in CA, pretty easy to get a free membership and that will give you access to what and where most restaurants get their meat and supplies.


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## kevin james (Sep 30, 2019)

smokin peachey said:


> You mentioned you are a loan underwriter. Have you helped anyone start a restaurant? Could you go to them and see if they could order what you need using there account with a bulk food supplier?





smokin peachey said:


> You mentioned you are a loan underwriter. Have you helped anyone start a restaurant? Could you go to them and see if they could order what you need using there account with a bulk food supplier?



I definitely can't go that route. My company would consider this a conflict of interest and I could lose my job.


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## kevin james (Sep 30, 2019)

clifish said:


> do you have a restaurant depot near you?  there are several in CA, pretty easy to get a free membership and that will give you access to what and where most restaurants get their meat and supplies.



That is another great idea I will look into. Thanks.


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## clifish (Sep 30, 2019)

kevin james said:


> That is another great idea I will look into. Thanks.


I just got my membership last week and their meat dept is unreal.  Some items have to be bought in bulk but with a vacuum sealer you can easily break it down for personal and business use, it is not like you need to purchase an entire cow.


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## kevin james (Sep 30, 2019)

clifish said:


> I just got my membership last week and their meat dept is unreal.  Some items have to be bought in bulk but with a vacuum sealer you can easily break it down for personal and business use, it is not like you need to purchase an entire cow.



Would you happen to know if you can you sign up as an individual, or do you have to have a re-sellers license first?


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## clifish (Sep 30, 2019)

I do have a business (not even remotely food related so I had a fed tax ID).  If you know anyone with a business signing up with their tax ID will not remotely put them on the hook for any responsibility.  They gave me a couple of membership cards, no pictures and I can pay with any credit card or cash even if it is not in the company name.  I really think they just don't want everyone off the street joining but they really don't screen that hard at all.  A non-profit like boy scouts troop, church or FD can also join.

https://www.restaurantdepot.com/membership/signup

you could easily just get a simple llc to qualify and honestly even if you are doing on a small scale you should some sort of corp protection.


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## kevin james (Sep 30, 2019)

clifish said:


> I do have a business (not even remotely food related so I had a fed tax ID).  If you know anyone with a business signing up with their tax ID will not remotely put them on the hook for any responsibility.  They gave me a couple of membership cards, no pictures and I can pay with any credit card or cash even if it is not in the company name.  I really think they just don't want everyone off the street joining but they really don't screen that hard at all.  A non-profit like boy scouts troop, church or FD can also join.
> 
> https://www.restaurantdepot.com/membership/signup
> 
> you could easily just get a simple llc to qualify and honestly even if you are doing on a small scale you should some sort of corp protection.



Yeah, I totally get it, and if this turned into something even remotely successful I would definitely file an LLC and get all the necessary licensing etc. Right now I'm just kind of dipping my toes in the water to see if this even _could_ turn into a successful small business. If there is one thing my business lending career has taught me, it is that many small businesses fail within the first three years, and the food/restaurant business is considered a very high risk industry.


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## bmudd14474 (Sep 30, 2019)

kevin james said:


> As the threads title suggests, I'm looking for some very general help with menu costing. This is for an idea I had to turn my smoking hobby into a _very_ small business. It's not for catering, but something different all together and would again start out very small.
> 
> Basically my idea stems from the fact that I have coworkers, friends, neighbors etc. that have all taken an interest in my BBQ and have expressed interest in having me smoke some meat for them. So I thought of putting together a menu where they could put in orders for what they want, then I would buy everything, prep it, smoke it, and package it for them with heating instructions. Kind of similar to something  like this: https://www.corkysbbq.com/shop-online, although their prices seem insane to me.
> 
> ...



Well for starters its not as simple as you are hoping. Ribs are a bad example because you can't really always do 3x's your cost. Now I am about 2 hours north of you and shop in Reno alot. You should check out Smart Food Services formerly known as Cash and Carry. They have Spare ribs cheap and right now have them on the hot sheet for $1.55/lb. 

Yes you would love to have prices as 3x's the cost of the meat. This will allow for the cost of the meat, cost of incidentals, and profit. Now if your going to be on the up and up you have to consider the % of the profit that will go to pay taxes. 

So if you get ribs for $2/lb and a rack is 3 lbs yes you can do it at 3x's the cost or a tad more. So say $20/rack. I know alot of places are 20-25/rack so that would be on point. 

Now take Pulled Pork. You can get boneless for $1.55/lb right now at Smart Food Services. Now you can't do 3x's the cost of the raw meat. You have to figure that if you have a 10lb butt at $1.55/lb you paid $15.50 for the butt. You will yield about 6lbs of meat that you can sell so the meat is really costing you $2.58/lb. So you should charge $8/lb. Now this is where I would go closer to $10/lb. You can give a bulk discount if you want if they are buying more. 

So as you see pork butt is a higher profit margin. It will average out and you will also find out if you are making your own rub the more bulk you buy the spices the lower your cost will be on this stuff. Also if your using a rewards credit card or rewards membership at costco you are getting a % back on the cost of the items that will help with your overall profits. 

Bottom line is you have to be comfortable with what your charging but you also need to make sure you covering all cost including flue or electricity depending on your smoker. Also the fuel your using to drive to the store and back.

PM me if you have more questions.

Brian


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## fullborebbq (Sep 30, 2019)

In the last three years I have turned my BBQ and sausage making hobby into a small business. I had a LLC from a previous business and I am able to use it for the new venture. 
As many have said, Ribs are a tough product to make money from. You will need a vary steady clientele for them. Pulled pork is great but you will need a chamber Vacuum machine to have any chance of freezing it for any length of time, see freezer burn. Then there are all the regulations, OMG! Now I live in NYS and have a Department of Agriculture 20C facility in my home.

Not trying to squash you dreams, but if you want to do this on the up and up be prepared to spend some money and time getting yourself going. 

Restaurant depot is where I get most of my meats and they are reasonably priced.

Good luck and may you make your own dreams come true!


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## chef jimmyj (Oct 1, 2019)

Most states require an Inspected Kitchen, separate from your home be used. All equipment must be NSF certified, meaning a professionally built smoker, though the smoker requirement seem lax in many states,  judging from the pits you see on TV. I imagine California has some crazy health and Safety laws regarding Smoke Generations and how it's handled to meet Clean Air regulations.
Brian nailed it. 30% Food Cost is a good starting point  but then you have to look at what the market will bear. You may have to go 40% on expensive meat to keep the Menu Price Reasonable but can go 20-25% Food Cost on what you can get Cheap. The Menu Mix should should average out at 30-33%.
Here is a Catering Costing program Brian posted a couple of years ago. See Post #4, GOOD stuff!...JJ

https://www.smokingmeatforums.com/t...-cook-quantity-questions.258793/#post-1670615


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## kevin james (Oct 1, 2019)

Thanks for the great info BMudd, fullbore, and chef Jimmyj! I appreciate it. The part about doing ribs closer to 40% with butts at 20%-25% makes a lot of sense, trying to hit an average food cost close to 30% or thereabout.


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## cmichini (Oct 1, 2019)

If it were me (and I'm contemplating a similar endeavor) I would expect at the outset:

Cover costs and have some margin
Build brand/reputation
Enhance skills, process, etc.
Then as the enterprse scales up, expect improved purchasing power to facilitate fatter margins & normalize the financial results.

I'd love to hear how this progresses.

Good luck!


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## bmudd14474 (Oct 1, 2019)

cmichini said:


> If it were me (and I'm contemplating a similar endeavor) I would expect at the outset:
> 
> Cover costs and have some margin
> Build brand/reputation
> ...



Food for thought for you on your thoughts. If you start lower in price to build your brand then start raising prices that will turn off a certain % of customer. But being a bit higher might turn a few off too but usually if your product is good enough you can win over the ones that think its a tad high but the ones that think you are too expensive because they knew you when you were cheap usually do not buy at the same% as before. 

Just something to think about. Your time if valuable. I think you are better off at pricing right the first time and throwing a free lb of stuff in here and there to build you name and brand but make sure they know that this was free and this is the normal price.


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## kevin james (Oct 1, 2019)

cmichini said:


> If it were me (and I'm contemplating a similar endeavor) I would expect at the outset:
> 
> Cover costs and have some margin
> Build brand/reputation
> ...



Agreed. I'm a numbers guy by nature (and career) and I think one of the things I need to take a deeper dive into are the costs that need to be prorated. Things like fuel for the smoker, and other supplies like foil and foil pans, gloves, paper towels, and smaller ingredients like spices, sugar, molasses, honey, apple cider vinegar, apple juice and other various things that go into the  sauces and rubs to figure out cost and how much production per unit these items will get me through to allocate their costs properly. I also need to figure out what operating expenses I would incur, and most importantly.... I need to talk to some potential customers to get an idea of what they really want and what they're actually willing to pay for it.

One thing I'm pretty sure I have decided on is that the menu will pretty basic. Probably pork ribs (St Luis and baby backs, both wet or dry), pulled pork, and tri tip which is extremely popular in my area, plus sauce. I might do some chicken, but not sure on that one yet. As much as I personally LOVE brisket, I don't think I would sell a ton of it and it's too pricey. The tri tip would sell better and it's easier.

The good thing is I'm not in any hurry, and I'm willing to put in the time and effort needed to figure these things out. I plan to enjoy the process itself of researching and figuring all this out.


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## cmichini (Oct 1, 2019)

Oh, I wasn't thinking of managing price, but managing margin. So go with a fair price, and one you hope to stick with, knowing that your costs will be abnormally (or likely unsustainably) high as you get out of the gate.  Then as you build volume, and can leverage economies of scale and increase purchasing power you can lower those overall costs and eke out more profit from that revenue base.

Definitely need to keep your price point in mind so as not to seem like you've gotten full of yourself and start to 'gouge'.

Thanks for the feedback though. The customer perception (price, quality, service) are so very important and can't be overstressed.

Cheers!


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## smokin peachey (Oct 1, 2019)

Are you going to offer any sides? I think a couple good side dishes could offer the most mark up.


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## kevin james (Oct 1, 2019)

smokin peachey said:


> Are you going to offer any sides? I think a couple good side dishes could offer the most mark up.



To be honest, I hadn't really thought of doing sides, at least not right away. I agree it is something to think about though. Good point!


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