Menu Costing and Profitability Guide for Cafes

Every cafe owner knows: delicious food and drinks are only half the battle. Profitability is key. That’s where menu costing comes in.

Menu costing for cafes is the process of calculating the ideal selling price for each item on your menu, considering both the direct and indirect costs involved in preparing and serving it. It goes beyond simply adding up ingredient costs and aims to ensure your cafe operates profitably.

This guide dives deep into menu costing for cafes, helping you calculate food costs, control expenses, and optimise your menu mix – Let’s unlock the secrets to a thriving cafe!

These are the tangible expenses directly tied to each menu item. This includes the cost of ingredients, such as food premixes, disposables like napkins and cutlery, and any specific garnishes required.

Here’s a breakdown of calculating the direct cost of our tempting Toffee-Kissed Peanut Butter Waffle:

• Waffle Premix: Since one kg of Waffle Premix makes 30-40 waffles (depending on your waffle iron size), divide the total waffle premix cost by the number of waffles it makes. This gives you the cost per waffle.
• Peanut Butter: One bottle of peanut butter might serve 20 waffles. Divide the total peanut butter cost per bottle by the number of waffles to get the cost per waffle of peanut butter.
• Toffee Stroop Syrup: Similar to peanut butter, consider the cost per pack of toffee stroop syrup and the number of waffles it serves.

Now, simply add the cost per waffle of each ingredient. This represents the total cost of the core ingredients directly used in making your Toffee-Kissed Peanut Butter Waffle.

These are the often-overlooked expenses that contribute to the overall cost of a menu item. Examples include labour costs (prep time, cooking, serving), overhead costs (rent, utilities such as electricity bill, cooking gas bill), and food waste.

By calculating the total cost of both direct and indirect costs, you can determine the food cost percentage (FCP) for each item. This FCP helps you understand how much of your revenue goes towards producing each dish and ultimately helps you set optimal selling prices that ensure profitability.

Most cafes aim for an FCP between 25% and 35%. This means that for every ₹100 rupees of revenue generated from a menu item, ₹25-₹35 rupees go towards the direct and indirect costs of that item.

The sweet spot for many cafes is around 30%. This allows for a healthy profit margin while still offering customers competitive prices.

Menu costing empowers you to understand your costs, but how do you translate that knowledge into real-world savings? Here are 4 key strategies to control costs effectively, ensuring your cafe stays profitable and your customers keep coming back for more.

Using high-quality premixes goes beyond simply saving time. It’s a strategic decision that minimises several cost contributors, keeping your FCP within the desired range. Here’s how:

• Premixes consolidate multiple ingredients into a single product, streamlining your inventory and minimising storage space requirements.
• Premixes offer consistent pricing, helping you predict and manage ingredient costs effectively.
• Individual ingredients have varying shelf lives, leading to potential waste. Premixes often have longer shelf lives, reducing spoilage and unnecessary expenditure.
• Premixes eliminate the need for extensive prep work like sifting flour, measuring spices, and cracking eggs. This saves time and labour costs associated with preparing batters from scratch.

By minimising these factors, premixes contribute to a leaner operation, reducing both direct and indirect costs, ultimately keeping your FCP under control.

Premixes simplify recipe execution, minimising training time for new staff. They can be serving up delicious dishes from day 1, leading to faster return on investment for your cafe.

In the competitive cafe world, consistency is key. Premixes ensure identical taste and texture every time, delighting your customers and keeping them coming back for more. Loyal customers are your biggest asset, driving long-term growth and differentiating you from the competition.

Your menu mix plays a crucial role in overall profitability. Incorporating crowd-pleasers like waffles, pancakes, churros, or stroopwafels can significantly boost your profits. Here’s how:

• High Perceived Value: Customers perceive these waffles, pancakes, churros, stroopwafels etc. as indulgent treats, justifying a slightly higher menu price.
• Efficient Premix Usage: Making the above items with premixes such as Waffle Mix, Pancake Mix, Churros Mix, or Stroopwafel Mix minimises ingredient waste and prep time, keeping costs down.

By understanding your costs, both direct and indirect, you can make informed decisions about pricing, portion control, and menu optimization.

This guide has equipped you with the knowledge to calculate food cost percentages, implement cost-controlling strategies like utilising premixes, and build a menu mix that delights customers while driving healthy profit margins.

Remember, a thriving cafe requires a blend of delicious offerings, operational efficiency, and a keen eye on costs. Embrace menu costing as your secret weapon, and watch your cafe blossom into a local favourite!