cost question- food/drink

coffeetalk23

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Feb 14, 2007
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What would be considered a good percentage for your food/drink cost off your gross revenue? 20%,30%,40%.

Thanks for any help.
 

cafemakers

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Nov 3, 2004
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Is this multiple choice?

Perhaps you can rephrase the question or give some additional information about what you are trying to solve with this information so that we can answer intelligently.
 
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coffeetalk23

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Feb 14, 2007
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Can we cut the newbee some slack here.....

lets see rephrase....i am looking at purchasing a coffee shop. Their food/drink cost percentage of there gross revenue is 30%.....is that high, low about right?.....currently they are selling specialty coffee, smoothies and a small portion of baked goods.....cookies, cake etc....

did i do better or no?
 

John P

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Jan 5, 2007
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Salt Lake City
It's still hard to say....

What percentage of sales is food?
What percentage of sales is coffee?
What percentage of sales is blended drinks?

What can you see they are doing right?
What can you see they are doing wrong?
Do you think they are charging too much/not enough?
What is the quality of their ingredients?
Low quality= low cost, low return.
High quality = high cost, high(er) return?
What is their percentage of waste?
Do they calculate waste into their figures?
Why or why not?

Start with this, and I'm sure someone will point you in the right direction as to what else you should be really looking at.
 

Jackson

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Aug 22, 2006
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Columbus, OH
When you mention food cost, are you talking about food and beverage or are you talking about cost of goods. Cog's consist of food, beverage, packaging and operating costs. To be a profitable business venture, you should probably want your food cost (and beverage) to be around 23% or less. Packaging should run around 3.5% or less. Operating costs (cleaning supplies, trash bags, toilet paper and hand towels, and maybe plastic gloves for food handling if required by local health department) should run around 1 to 1.5%. All of these costs include waste. The formula for food cost is simply; beginning inventory + purchases - ending inventory. You may look at waste if your costs are out of line, but it is really not part of the original formula.
To make money in this business, you want to strive for food and beverage cost and direct labor to be 50% or less. That allows you a 23% food cost and a 27% labor cost. Understand that if you only sold beverages with no food, your beverage cost would be about 15%. In some cases, the cup and lid cost as much as the product inside.
If you carry frozen proof and bake pastries, and discard unsold pastries each night, they will be your highest cost items in your shop. This is all part of the cost of business these days.
 
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coffeetalk23

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Great insight Jackson...thank you.... this is more of what I have been looking for.
 

CafeBlue

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Dec 8, 2006
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Toronto
Nice comments, Jackson.
I consider %27 labor cost on the high side for a profitable cafe. While in start-up mode and with relatively low retail sales, you might plan for that level, once the business gross increases, the labor percentage should drop. If it doesn't, the management should consider retail price increases and labor scheduling and efficiencies.

23;
The current business owner likely told you their pricing policy and has no real clue about the detail one actually requires to effectively operate a cafe. Just look at Andrew's and Jackson's comments and you see what I mean. The seller may not have much business acumen, but if you do not put more into it than they do, you cannot expect real business growth when you take over management. That said, they likely mark up %300 (3 times cost = retail price) and therefore EXPECT %33 food cost. It is therefore unlikely that they have considered waste, packaging, sampling, etc. and likely the ACTUAL YIELD (follow Jackson's math) COGS is overstated.

Your beverage COGS can easily end up within a few points of projections/ideal, unless you experience high waste from discarding coffee that went stale/cold/cooked from idling too long after brewing.

Food COGS varies based on your food prep concept/concepts, sampling, freshness standards, and waste. Furthermore, the labor cost varies in relation to food cost depending on prep method/concept.
If we take as given: food quality will improve if COGS is increased to improve ingredient quality, and imagine that (although several ingredient quality levels are available for each concept) the following cases are for equal ingredient quality. "Scratch" baking and food prep has the lowest food cost (but relatively high labor man-hours, and higher labor/hour rate). Frozen dough, frozen par-baked, frozen pre-baked all have lower labor and somewhat higher COGS with less skilled labor requirements. Off-site fully prepared foods have lowest labor cost, highest Food COGS, and usually highest shrink from waste.
Since COGS expressed as a % of gross sales also depends on retail pricing, the many business strategies have different end results. I have seen cafes operating effectively with as little as %24 to as high as %60
COGS for food category. Needless to say, I have also seen operators with actual yield including waste at %60-%80-%110.
I hope this gives you some pause to consider your plan carefully. Keep in mind that these comments and numbers are generally speaking and do not necessarily apply directly to your business.

Good luck, but good planning too.
 
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coffeetalk23

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thanks blue....I am a planner so I will take all of your info into consideration...

Thanks
 

futurecoffeeshop

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Jan 30, 2007
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labor costs

I know this is a little off the topic of food costs but seems to relate to the conversation. In my planning, labor costs seem to be higher than "recommended". I'm thinking of having two employees in the shop. One for POS and a barista, it is a 900 sqft sit down with a drive thru. Does this sound right? Do many of you have only one employee during non-peak hours?
I know this varies with location but what is the "going rate" of pay? I'm in a smaller community and it looks like $7/hr plus tips for me to attract good help (I would then have longevity raises every 6 months to a year). Do people out there provide any additional benefits? The required workers comp insurance alone in my area is fairly steep.

Thanks.
 

ElPugDiablo

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Jul 16, 2004
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Hartford and New Haven, CT
Here are drinks cost assuming beans at $6 a pound

For espresso
1 pound = 450 grams
double shot = 14 grams
450grams/14 grams = 32 double espresso
$6/32 = $0.19
factor in 10% waste, and you cost is $0.21. If you use a triple basket, multiple $0.21 by 1.5 and your cost is $0.31.

For drip
1 pound makes about 250 oz of coffee.
250 oz of coffee equals 25 cups of coffee assuming 12 oz cup and 2 oz room for milk.
$6/25 = $0.24. add $0.06 for 2 oz of milk, your cost is $0.30. Factor in 10% waste, and you are at $0.33.

cup, lid and sleeve run about $0.15. Add 1 cent for Napkins, sugar and stirrer. Your COGS is about 50 cents. If you sell it at $1.50, you are at 33%.

For latte and cappuccino COGS, add cost of 8 oz milk and syrups if any, and you can those COGS.
 

ElPugDiablo

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Jul 16, 2004
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Hartford and New Haven, CT
Re: labor costs

futurecoffeeshop said:
I know this is a little off the topic of food costs but seems to relate to the conversation. In my planning, labor costs seem to be higher than "recommended". I'm thinking of having two employees in the shop. One for POS and a barista, it is a 900 sqft sit down with a drive thru. Does this sound right? Do many of you have only one employee during non-peak hours?
I know this varies with location but what is the "going rate" of pay? I'm in a smaller community and it looks like $7/hr plus tips for me to attract good help (I would then have longevity raises every 6 months to a year). Do people out there provide any additional benefits? The required workers comp insurance alone in my area is fairly steep.

Thanks.
We always have at least two people at our shop, and we don't have a drive thru.
 
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