I have a bride that wantes to book for Oct 2009...my question is this... With prices rising so dramatically how can i gaurantee her price this far out? What if flour triples again and then she has a cake at the summer 2008 price? Am i just out of luck or what?

I thought about saying that her price was gauranteed unless my prices increased more than 20%, then I would increase hers by 10%....

OR

I could tell her that her price would be adjusted at the one year mark to relect the current price...

Help...I am not sure what to do...


Julia

That's what I'm up against now. I've got a wedding June 7th that was booked almost a year ago... I'm barely gonna make it with the price I quoted them then and the way prices are now... Eggs alone have quadrupled in this area... But I didn't think I could do anything. I wish I knew how to "re-word" my contract to allow for the flexability in the cost of living....

My thinking is to price out this cake. How much of the price actually covers the ingredients? Then you could consider either 1. Raising that portion of the price substantially (doubling it, perhaps?) or 2. Tying that portion of the price to a consumer food index of some type or 3. Putting in your contract that the price of this cake is subject to change, depending on the cost of _______.

I think these escalating prices are a good opportunity for bakers to be sure they are being properly compensated for their time and talent and not just covering the cost of ingredients. That is a gamble these days.

Honestly, I can not imagine anyone signing a contract that has a "maybe" price. It doesn't really sound fair to the baker but leaving it up in the air really isn't fair to the bride....they have budgets too. IMO when you see prices like this (everything rising at once) it's because businesses are already accounting for their own price increase....unfortunately we are all probably going to have to do that also. It's time to recalulate the costs of our ingredients and add some for inflation....hense raising prices.

Honestly, I can not imagine anyone signing a contract that has a "maybe" price. It doesn't really sound fair to the baker but leaving it up in the air really isn't fair to the bride....they have budgets too. IMO when you see prices like this (everything rising at once) it's because businesses are already accounting for their own price increase....unfortunately we are all probably going to have to do that also. It's time to recalulate the costs of our ingredients and add some for inflation....hense raising prices.

Honestly, I can not imagine anyone signing a contract that has a "maybe" price. It doesn't really sound fair to the baker but leaving it up in the air really isn't fair to the bride....they have budgets too. IMO when you see prices like this (everything rising at once) it's because businesses are already accounting for their own price increase....unfortunately we are all probably going to have to do that also. It's time to recalulate the costs of our ingredients and add some for inflation....hense raising prices.

I agree that I would be leary to sign an up in the air pricing contract.

But to raise the price on a maybe seems unfair to this girl. Just because she booked out far I charge her more?

Perhaps I can just put on my calendar that I am going to raise prices on Jan 2009 and price based on that....I guess an increase would be fair at that time...and then everyone else I quote for 09 will have the same increase....

What about that?

It wouldn't be like charging her more because she is booking far in advance....it's like charging everyone more from a certain date on. September is the month I re-evaluate prices and raise accordingly. If you wait until January (totally my opinion here) you are going to lose money on every cake you book until then....and the holiday season is a great time to book weddings IMO. It's not really the extra cost for ONE cake that is going to hurt your bottom line...it's the cost of the many cakes that you do. I hope that makes sense!

My sisters work/worked for the government and each January they get a 6% cost of living increase. So, I think based on what you are proposing that seems fine. And really, I think what I would do is price her regularly plus half the percent you plan to increase. That way you are still making up for some increase that is bound to happen, yet giving her a break since she is booking out so far in advance.

I don't book without a 50% deposit... so if someone pays me 50% up front, and I have use of that money for 9 months (which could be earning interest, or used to help further my business now) - then I'm certainly going to honor the quoted price. Ingredients should be the cheapest thing to consider for a cake... the labor is what's going to cost.

i've booked 6 cakes for 2009 so far, and all of the prices for them are 50 cents more than current price per serving, and my delivery is $25 more as well.

But I had a bride call me and ask me about her wedding cake in October and said, I see the prices are going up a lot, what happens if the cost of my cake exceeds the amount i paid for it??? And I was like, well you wouldn't know that, I would make your cake and cry when I delivered it. She laughed and was like, no seriously, would you cancel my order? and I said, no absolutely not, my business would take a hit...

Here's the thing, I priced out every penny (except electric) into a cake recently (the blue and green one with the big B on top) to see how the prices have gone up since last year. It was a whipping cream pound cake made with cake flour(more pricey than flour), plastic cake boards, 2 buckets of pettinice fondant... with the boxes used for transport, all of the saran wrap and paper towels, it worked out to be $1.48 per serving for a 185 serving cake. It's not that I want to LOSE money next year, but my prices for fondant cakes start more than triple my cost. I just can't imagine things going up so much that I would actually LOSE money on a cake.

And, I only have 6 cakes for 09, the majority of my clients book within 3 months, so even if 1 cake was booked out and is low profit, all the rest of them will be just fine. but like I said, I did increase my 09 prices for people who book then.

ziggytarheel wrote:
I think these escalating prices are a good opportunity for bakers to be sure they are being properly compensated for their time and talent and not just covering the cost of ingredients.

SOOOOO true...If the cost of your ingredients are going to make so much of a difference in your profit that you're not making any money at all, you're not charging enough for your time. The cost of materials shouldn't be so close to your price that an increase at the grocery store will wipe out your profits. That just means that you're not charging enough for your own time.

When I do taxes at the end of each year it usually turns out that all of my expenses including ingredients, advertising, equipment, insurance, etc. total about 1/3 of my gross income. That means that I'm taking 2/3 of the total gross as my net profit. If my ingredients go up, it won't cut into that too much. If all of my expenses were 2/3 of my gross income, the story would be different.

Make sure that you're adding enough to the price of your cakes to compensate yourself for your time and talent!!!

You know now it makes sense to me....

i jsut looked at my cost worksheet...and I think that I can take a 50% increase in cost, and still make a decent profit.

I had a friend I was talking to about not wanting to go to PA to visit MIL this summer because of gas. He figured the cost versus mileage and it was really only an added $40. So I guess the media hype is working on me....the sky is falling, the sky is falling!

I will try to evaluate cost versus value better int he future....

Julia

I heard on the Wall Street Report just TWO DAYS AGO that the price of eggs, bread and milk went up 18% since last month.

18% IN ONE MONTH!!!!!!!!!! That's over a 200% annual increase!!

So do I feel bad doing a 20% across the board price increase twice a year now, instead of my annual Sept 10% increase? Not on your ever luvin' life do I feel bad about it!!

Here's the part of the Terms of Agreement pertaining to price. I've never implemented it ... I agree with Brandi's logic on this ... but for those who were looking for wording. (My terms are attorney approved):

The quotes given are based on costs at time of booking and are subject to increase based on costs at time of performance. Client grants management the right to raise prices proportionately if necessary and to make substitutions to the menu when necessary. Any changes will be communicated to the Client prior to the event when possible.

P.S. I found a local caterer (he's what I refer to as "one of the Big Boys in town") who requires a $1000 non-refundable deposit to get on his calendar .... BUT ..... ! He wont' tell a bride what her actual pricing will be until 6 months before the wedding. I understand his logic, but it strikes me wrong that a bride who needs to book with this big time caterer (because I'm sure they book pretty far out) and has to hand over $1000 that she is never going to get back, and if pricing doubles between now and her wedding, she's either stuck with doubled pricing, or she loses her $1000 AND has to find another caterer within 6 months .... and that's assuming her venue allows just ANY caterer in the door! I understand why it's set up this way .... but it still bothers me that it's set up this way.

I recently added a clause to my contract that says...

Price Increases:
  Due to the current uncertain economic conditions any cake ordered more than three months in advance may be subject to a slight price increase to cover the cost of rising ingredients.

I have explained to my last two brides that I have heard rumors that flour may go up to as much as ten times the cost that it is now and if that happens I will call them and let them know that it will cost me X amount more to make their cake and that it is up to them to pay the extra or cancel and get their money back. If my cost only goes up a few bucks I won't bother but if it is going to cost 50 more to make their cake I need to charge them that. If God forbid prices go up drastically we can decide together what to do.

Val

Do NOT put a "I may have to charge you more" clause in your contracts! Thats the point of a CONTRACT, agreed upon terms. Bride-y can't decide she's just going to have to pay you less because the cost of gas went up either. I agree with pps, your time cost should be the lion's share of the price. Be professional. Set the prices you want to get, book the brides, and honor the contracts. Anything else makes you look like small potatoes. Flaky small potatoes.

I wanted to clarify from my previous post. Those were ideas as to how you could handle it. There are certain industries which have gone that route with their contracts. But, given that to be profitable (and to make your effort worthwhile), your price should be largely about your time and effort and only a small part about the cost of ingredients, sky rocketing prices shouldn't kill your profit. But I would certainly schedule price increases now and include them in your quotes.

I'm raising my prices (again!) on 1st July, but if people book a cake before then for cakes due after that time, I will honour today's prices. I may end up taking a loss on my profits, but I think that's better business practice!

You could have a "gas surgarge" clause. Seems like everyone is adding those these days- the plumber, the electrician, the supply delivery guy, even my gas company had a gas surcharge for delivering my propane!!

I have talked to a few people about next year and have consults coming up. I believe I am going to set my price .25 more per serving and leave it at that and review it every 3 months. I had in the past, set the price for the entire year. I belive that I am going to start booking for next year at an increase but review that at the end of March, end of June, end of September and see if those prices still work or not.

I think what I am going to do is this....

I am going to raise my per slice price in Nov by .25. So for all brides that book for dates after that will get the increased price. I will review raising prices in jan 09 and see if I need to raise again. For those brides that already booked, they will get the price that I gave them when I quoted them.

Thank you all of your suggestions, it really gave me a lot more clarity. ireally want to be fair to my customers and myself.

Julia

I think limiting yourself to a .25/serving increase is a bad idea. The reason being that with the prices of commodities doing what they are you may still be losing your shirt by going that little. If you go on the high side by an increase of .75, you can always offer a price reduction to the bride if the cost of commodities does not increase at the projected rate (for example, they allow an extra refinery and drilling to be done easing demand and the gas price drops). Brides feel better to get a "discount" than they do to be left in the dark on what the prices are.

Think about it this way, would YOU honestly sign a contract with a vendor of any sort that did not lock in a price. How does it make you feel when the plumber charges you the service call but won't tell you how much it is going to cost to fix your leaking pipe fitting that needs to be replaced? Not very good. By locking in the rate, the bride knows she's getting a deal if the prices go up and she's smart enough to do this now instead of waiting OTOH, if the prices don't go up for your costs as much as you expect she knows you're going to have her back. A bird in the hand is worth two in the bush... or "Three cheers or three bucks, take the three bucks!"...

I leave the price in the contract as is. The only thing that is flexiable is if the cost of gas gets to more than 4.00 a gallon. Were at 3.75 right now. Most seem to agree that an extra gas charge is acceptable.

If prices have to adjusted 3 times a year then that's what needs to be done.

Here's an Excel worksheet to help you calculate delivery charges.

NOTE: only areas w/ pale yellow background can be edited (the sheet is password protected!!)

In column A (far left) are the GIVENS:

what your delivery vehicles OVERALL AVERAGE MPG is -- example: my little PT Cruiser gets about 18 in the city and 24 or so on the highway. Therefore with the mix of driving I do (city vs. hwy) I get an overall average of 20 -- which is what is entered currently. Change this to your figure.

then the cost of gas per gallon. I used $4.00 as it's a nice round number and most of the stations in my area are flirtin' with it. Use the actual amount you're paying. Tho' I would round up some (ok, a fair bit)

it then calculates the cost per mile and uses it to recalculate the sheet.

ALSO -- the current IRS rate is 50.5 cents/mile which is entered. This changes annually -- just check their website for the latest figure.

VERY IMPORTANT TO REMEMBER -- the IRS and YOU SHOULD TOO! sets its rate to include not just the cost of gas but also maintenance, insurance, and depreciation on the vehicle.

(I thought it interesting that the current IRS rate matches fairly closely the 2.5x the cost of gas at $4/gallon.)

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Note how at the top of the middle four columns you can set a flat fee for the first 15 or 25 miles and then an additional fee for each 5 or 10 miles beyond the first amount.

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HTH