Pricing your bread for market
Harold's Bread ®, Bakery - Chuck Wagon
F o o d S e r v i c e And/Or B r e a d P r i c i n g F o r m u l a s
by Harold B. Camara
B r e a d P r i c i n g F o r m u l a
Price (COST OUT) Your Foods (Baked Goods) Products (i.e.: COSTING).
Scientifically compute the exact cost of all:
Containers (Bread Bags, Labels etc.)
Shipping or delivery, plus an estimate of the
Utilities (gas, electricity). Then, add your
Labor (what it would cost to hire someone to do the job).
Establish Your Wholesale Food Price(s).
After you have established "Costed-out" (computed) your food cost (STEP 1 above) Add the total cost of your baked goods (foods) and then DOUBLE The Result.
The Above Wholesale COSTING FORMULA will give you a quick guide to price your foods, and allow for some spoilage and waste.
Suggested Retail Price COSTING FORMULA:
(After You Have Established Your WHOLESALE PRICE As Mentioned Above)
ADD ANOTHER 66.7% (percent) To Get The "Suggested RETAIL Price" (This Equates To A 40% "Profit Margin" For Your Retailers).
For example, if a loaf of your homemade rye bread costs fifty cents to make (counting all costs), your wholesale price would be $1.00, (or DOUBLED).
To add 66.7 percent, punch in 1.00 on your pocket adding machine then "+," then 66.7, then "percentage." This will give you $1.6667, which is rounded off to $1.67.
40% off of the $1.67 total - is now, (1.67 - 40% is 1.002 (rounded off to a dollar) which is the $1.00 "Wholesale Price" we started out with.
Markup COSTING FORMULA:
If you wanted to give your retailers a 40 percent markup (which is not the same as a 40% profit margin), you add 40% to the wholesale price (1.00 plus 40%) you would get a suggested retail price of$1.40 per loaf
The more markup you give your retailers, the more incentive they will have to push your products, or if most of your business is wholesale, consider the bigger markup. Your retailers can always lower the price.
For clarification, MARKUP is the amount the dealer adds to his wholesale cost. An item that costs him one dollar and he sells for $1.25 is marked up 25 percent.
PROFIT MARGIN is the percentage of the sale price that is gross profit. If the item costs him a dollar and he sells for $1.25, the 25 cents is only 20 per cent (5 quarters in $1.25, each = 1/5 of 20% of the total) of the total sales price (profit divided by sales price, or .25 divided by 1.25) -- or, a 20% profit margin.
TO SET UP AN AREA WHOLESALE BUSINESS, call on prospective retailers, let them know of your plans and ask for their suggestions. If possible leave a few samples with them, and ask for an order. Do this early, so if any needed production adjustments can be implemented before your procedures are finalized. Tell the prospective retailers what you have too offer, what it costs, how much profit that makes, and when you deliver.
It is extremely important that you do exactly what you say you will. If you say you deliver on Monday's make it a point to drop by those who have not yet ordered -- just to show them they can rely on you.
If your products could be blamed for something that would involve a lawsuit, consider some general liability insurance. Check with (more than one) commercial insurance agents to find out how you can be protected against such an eventually. This is an area where conferring with others in similar businesses is a particularly good idea.
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