Hi, I have a business class that is assigning a basic business plan.  I was assigned a cake bakery.  I'm on the financials section and I'm wondering if a 20% food cost is still high for cakes.  I'm currently thinking of pricing at $2.50 per serving plus embellishments based on time.  For a cake serving 300 guests, this formula gives me a base price of $750.  To which I'd add embellishments which I'll price out per flower (or other decorative element) based on how long each one takes to make.  For instance, it takes me 30 minutes to do a 6 inch diameter gum paste orchid, so I price those at $15 each.  The client wants 9 of them, so I add $135 to the base of $750 for a total of $885.  A 20 % food cost means I've got $177 in food cost alone.  That sounds high to me if ordering ingredients in bulk.  I'm in the midwest where things are a bit less expensive than on the coasts, would I be closer to reality to aim for a 15% food cost or lower?

Thank you in advance for your insight.  I'm good with the numbers, but I don't know a whole lot about cake.

Hi WineCountry, that does indeed sound high but you also need to take into account what part of the country you're in when pricing your cakes and purchasing ingredients. I'm in NY, so my servings start at $6 and go from there, no one really balks at that and it's the norm in these parts.  I just did a Cinderella Sweet 16 for 100 guests, I charged $600 and my food costs were roughly $40 (vanilla cake, Italian custard filling). Fondant is probably the most expensive food item I have to buy, I can't make enough MMF to keep up so I'm done trying. 

I buy all of my ingredients wholesale (www.jetro.com) and in bulk. On average, I would say my food costs are closer to 10%. I buy the best ingredients I can find typically (callebaut chocolate, etc). 

In my opinion, the larger problem in your formula is the cost per serving that you're charging. You could at least double that and not have a problem if you have the skills to back that up (I'm sure you do!) . If someone is spending the $ to entertain 300 people then they shouldn't be surprised. 

I'm sure others will chime in with some of their experiences :) 

Regards,

Frank

Hi WineCountry, that does indeed sound high but you also need to take into account what part of the country you're in when pricing your cakes and purchasing ingredients. I'm in NY, so my servings start at $6 and go from there, no one really balks at that and it's the norm in these parts.  I just did a Cinderella Sweet 16 for 100 guests, I charged $600 and my food costs were roughly $40 (vanilla cake, Italian custard filling). Fondant is probably the most expensive food item I have to buy, I can't make enough MMF to keep up so I'm done trying. 

I buy all of my ingredients wholesale (www.jetro.com) and in bulk. On average, I would say my food costs are closer to 10%. I buy the best ingredients I can find typically (callebaut chocolate, etc). 

In my opinion, the larger problem in your formula is the cost per serving that you're charging. You could at least double that and not have a problem if you have the skills to back that up (I'm sure you do!) . If someone is spending the $ to entertain 300 people then they shouldn't be surprised. 

I'm sure others will chime in with some of their experiences :) 

Regards,

Frank

My food costs are running about 14%.  When I started they were at 9%.  Sigh.  Everything's more expensive these days.
Those percentages do not include  electric and gas, water, etc. though.

 That's almost exactly where I am too, mine started at around 10% and are now around 15%.

And when I add in every expense that I have I'm at about 54% net every year, so the cost of ingredients is the least of my worries.