Food Service Price Strategy

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When a foodservice consulting firm sets out to help their clients improve profitability and manage their business performance they use tools they’ve developed to create strategies and technologies that can get their clients the results they want to see. At Momentum Sales and Marketing, several business intelligence tools have been created through our Analytics department to ensure that the best results are being achieved through each client’s business plan. These tools help manage price strategy to achieve profitability and allow clients to gain new insights into their business. At Momentum, we will share our analytics tools with you and work together to develop a price strategy that will help pay the bills and provide you with an income. Creating an efficient pricing strategy is just one more way to ensure that your food service business achieves its goals in a way that you are satisfied with and proud of.

Constructing a Effective Food Service Pricing Strategy

The first thing to keep in mind when developing a pricing strategy is knowing what customers are willing and able to pay for comparable food. You want to be able to land on prices that represent a solid middle ground, but you also want your customers to know when you believe a product is high-quality and worth a high price or when you are committed to providing a sensible, affordable product by pricing something a little lower. There are three different factors you could base your pricing strategy on: 1) ingredients cost, 2) gross margins, and 3) inventory levels. Picking one of these factors to base your pricing on and then adjusting as the food service industry changes, can help you develop a strategy that will turn out the profits you want to see from your business. Each method is different, but can be effective if used in conjunction with the rest of your business plan, highlighting why reaching out to a foodservice consulting firm is ideal. At Momentum, we can help you narrow down which pricing method fits best into your overall business plan.

  1. Ingredients Costs – This food cost percentage method makes sure that the ingredients used cost no more than one third of the price. Calculating this is fairly simple, you just add up the amount you pay for every ingredient that goes into a batch of the finished product, divide that total by the number of items that a batch yields, and then multiply that cost per item by three. An example is, if you pay $10 in ingredients for a batch that yields 10 cupcakes, then the cost per cupcake is $1, so you would charge $3 per cupcake.
  2. Gross Margins – When you base pricing on gross margins you must factor other expenses into the price that you charge. An approach to this would involve adjusting the price relative to a range of elements including labor costs, rent, advertising, and the cost of equipment. For example, a restaurant with a prime location in a high-rent area might adjust its food prices to reflect its significant rent expense, or a caterer who decides to provide its employees with health insurance might decide to raise their prices to cover that additional expense.
  3. Inventory Levels – Pricing can also be based on inventory levels. This approach prices by monitoring how much the business actually has spent on ingredients rather than by calculating how much it expects to pay. This method is good for adjusting prices rather than setting them. After a business has researched prices for ingredients for a new item and then calculated a price for that item, down the line they can check whether these prices are sufficient by counting inventory and reviewing actual expenditures. This method also takes into account losses due to shrinkage and waste.

Creating Prices with Momentum

Pricing plays a big role in constructing an efficient business plan within the food industry. The prices you place on your product are ultimately what drives in your profit and we know that it can be a little intimidating when you start thinking about how much you are going to charge. With Momentum Sales and Marketing, we’ve created our own Business Intelligence Tools that help structure pricing, strategy, and policy so that we can help you meet your financial performance goals. Our tools provide our clients with knowledge about optimizing and maximizing their profitability, provide transparency and structure to their price planning process, enable data driven decision making on all pricing decisions, minimize risk by budgeting and tracking all customer investment, understanding how delivered price can be leveraged, and monitoring projections regarding volume, profit, and bottom line performance. Creating a pricing strategy gets you in a secure place with prices so that your business will drive in a profit and be successful.

Momentum Sales and Marketing, Your Choice For Food Service Consulting

Momentum Sales and Marketing is a Foodservice Consulting and Business Solutions firm that will introduce you to a customized sales and planning process that will help you reach your goals within the food service industry. Our goal is to help clients improve their profitability and refine their business performance so it is at its highest standard. You’ll always have access to our team with our On-Call Consulting platform because we want to help suppliers become the business that others want to do business with. Our dedication to integrity, leadership, and responsibility can help you get all the wins you aim for within the industry. All three of our partners have been a part of the industry for over a combined 100 years, and we only hope to expand our experience and knowledge while we help you navigate understanding your business, developing solid customer relationships, traveling along the value chain, and training those who are going to help further along your businesses. As the food service industry continues to evolve, we want to help you grow along with it.



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Food Service Price Strategy

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