WHAT IS YOUR BLOCK CHEESE PRICES THIS WEEK? ALSO, HOW MANY CASE OF CHEESE DO YOU USE ON AVERAGE IN A WEEK??
Well all I can tell you is I am getting tired of 20 and 30 cent swings on the CME. It makes it really hard to factor your food costs when the main ingredient can move so much in one day! :roll:
When I first started in this business cheese was pretty reasonable. But it is insane now. So I will have to raise prices so I can handle these wild swings. When I price things knowing I am paying " at the most " $2.55 lb i’m okay but it has been above that way more than below so it is time to adjust up …again…and boy do my customers love that. 
Just for what it is worth, this same thread topic is posted every week or two, looking back for an older version rather than starting a new one provide some interesting context for the topic.
We are paying $2.18 this week and we are using about 800 pounds a week. The highest price we saw in the last 90 days was about $2.45 but we had bought about 1500 extra pounds going to that period when we saw the CME price jump so the highest price we actually paid was $2.35. With Chicago prices around $1.75-$1.90 for the last two weeks I am hoping that we will see prices fall to $2.10 if not $2.00.
We raised prices Dec 1st. The increase on a 16" (our best selling size) was 50 cents for the pizza and 20 cents per topping. We also raised our delivery charge from $1.50 to $2.00 and increased prices on sides and appitizers by 50 cents on most items. We also started charging for salad dressing. (25 cents for a serving packet of Newman’s own)
We got some heat over the price increases and no doubt have lost a few orders. The average order of a pizza and some sides went up by about $3.00 including everything. With gas prices here at $3.20, pizza maker wages at $11.00-$12.00 (that is for cook, not shift leader) cheese up by 50% and flour up by closer to 100% you have to raise prices and raise them meaningfully.
Well I hope you don’t think I am beating a dead horse…but the only reason I jumped in is I have never seen such dramatic jumps. Even gas moves slower. Buy that is the way it is.
Since the economy is slowing I have noticed a real increase in my coupons…I am getting alot more. They used to be about 25% of my orders where now they are 72%…the consumer is getting more frugal and since it is taking cheaper prices to entice the consumer volital swings in cheese do not bode well for me. Doing a business plan with food costs jumping from 29 - 33-37% and back again month to month and week to week just from one product makes it a little frustrating that’s all.
But that is the nature of the CME. And I guess I will have to get used to it. :shock:
No not beating a dead horse, just that I prefer continuing dialog to starting over. No problem.
If your food costs are jumping between 29% and 37% the problem is not the cheese pricing. Even if the price of cheese doubled overnight it would not produce a move in food cost that large. You might have a look at other issues. The run up in the last 8 months from ~$1.50 to the ~$2.20 it is at now will only increase total food cost as percentage of sales by about 2%.
We have tightened up our coupons as another means to increase actual sales. We trimmed back slightly on the value of some offers and re-did training of staff to eliminate some double dipping on offers that we were seeing. While the proportion of orders using coupons has not really changed, the total value of discounts has dropped from about 20% of gross to 16%.
Okay all, I’m opening a new shop…all fresh made. I am being told my business plan is very good…but my margin is to low. I am looking at about 60% overall for pie, subs, and basic dinners based on current menu prices of other established eateries. Consultants are saying you should be around 75%. Would it be fair to say, because I am trying to stay in the current market selling prices based on many established menus, perhaps that is why I am not averaging 75%? With the economy the way it is, should I as a new shop, get my selling prices to 75% and be higher than the competitors? Or, stay at the 60% to compete and hope like all of us that the economy improves? Somehow, I do not see the prices coming down even if the economy shold improve(of which I don’t see that happening anytime soon). But, if I open to high, even with the best of the rest…I understand families are suffering and have to cut back, which no matter how good it is, they are be forced to eat Domino’s poop. Just like they are forced to shop at Wal-Mart, which, BTW, I feel is part of our ecomony’s issue.
If your food cost is 40% you will go out of business. Since you are at the business plan stage, it may be that your food cost assumption is wrong and your prices are not the issue. How did you develop your food cost assumption?
Thank you so very much for responding…is there a way I could send you an example in excel. My numbers might not be figured correctly and I am very anxious to find out what I could be doing wrong.
I have tried to break down the cost of a 16" pie and other selections. However, I do not have a true price sheet to work with and compare to selling.
Thanks again…
Andrea
alot of menu items will run at 40% but you gotta sell more of the items with 25%…like pizza…somewhere meet in the middle at 32% and thats realistic
Your two big variable costs are labor and food. You can run a little higher on food if you are in a low cost labor market. I am in a high cost labor market and must keep my food costs a few points lower than the 32% mentioned above. It is important to end up with an “ideal” food cost based on the menu that is a few points below the cost you need to actually get to. Your losses in waste, portion control, free food (employees, donations, promos, discounted sales etc) will eat up a few points. Of course, you also need to be using a true selling price figured AFTER coupons when you calculate food cost.
I recently did my numbers for 2007 taxes. I ended up with 28.3% cost for food and supplies combined. (all consumable products like paper, condiments, and cleaning supplies in addition to food stuff). We operate a seasonal slice location that does about 25% of gross as a company which lowers our food cost numbers but those costs are still up over the last year with the cost increases we have seen. This winter we are seeing monthly costs around 28% which is up from the 25.5 - 26.5 that we used to see in this season. This leads me to believe that we will see 2008 come in around 29% - 30% when all is done.
Our coupon “costs” run about 16% of sales at our delivery location and include our donations and promo since we “coupon” them down to zero. Our weighted cost on a 16" pepperoni pizza is 24% including the box. That is 24% of the ave selling price using the menu price less our average coupon discount. (ideal food cost on menu price is 20%) Cost on menu items that do not require a high level of preperation like wings, salads, mozz sticks etc are set around 30-35%. Grab and go items like pints of Ben & Jerry’s (those are are not given away as a coupon promo) are a lot closer to 45%.
You will find that food costs move around a lot. Prices on many things change weekly. The costs you are getting from a supplier to build your model may or may not have any real connection to reality. If you are using menu pricing from succesful independant competitors in your region that will have similar costs structure to yours, that is good place to start. All in all, I think it is bad strategy to go into a new business/market using low menu price as a plan. New entrants do not have cost advantages and having those advatages is an essential part of succeding with a low price strategy.
Check your P.M.s