How To Price A Catering Menu for Profitability
Catering pricing can be the difference between a thriving business and one that struggles to stay afloat. Even if you get everything else right, a poorly-priced catering menu will drag you down and cut off your success. Get it right, however, and you’ll unlock freedom and growth-potential.
In this article, we explore how to price your catering menu effectively to protect your profitability and your sanity. We cover things like:
Percentage rule of thumbs for food costs and margins
Pricing different components of catering menus (main courses vs desserts)
Tech and tools to help you stay profitable as vendors and menus change
Let’s jump right in.
Mastering Your Costs: The Foundation of Profit Protections
Before setting prices on any menu item, it's crucial to have a firm grasp on costs. This goes beyond just the price of ingredients and delves into the full spectrum of expenses that keep a catering business running.
Food Cost Guidelines
Food cost percentage is calculated by dividing the cost of ingredients by the selling price and expressing it as a percentage.
For example, consider a shrimp cocktail appetizer. If the ingredients cost $3 and it's priced at $10, the food cost percentage would be 30% ($3 ÷ $10 = 0.3 or 30%).
Most successful catering operations aim for a food cost percentage between 28% and 35%. Straying too far above this range can eat into profits, while going much lower might mean overpricing or compromising on quality. However, it's important to note that this range isn't set in stone. High-end caterers might work with a 25% food cost because their clientele is willing to pay a premium for top-quality ingredients and presentation. Conversely, volume caterers might operate with a 40% food cost, making up for thin margins with high quantities.
Labor Cost Guidelines
Labor costs are often overlooked by new caterers, leading to beautifully priced menus that actually lose money once staffing is factored in. For most catering operations, labor costs typically run between 25% to 35% of total revenue. This includes not just event staff, but also kitchen prep time, administrative work for event planning, and even a portion of the owner's time and expertise.
To illustrate, consider a wedding catering job for 100 people, priced at $50 per person. That's $5,000 in revenue. If labor costs are running at 30%, that leaves $1,500 to cover all staffing needs for this event.
Here's how quickly that can be allocated:
1 head chef (8 hours at $25/hour): $200
2 line cooks (6 hours each at $18/hour): $216
4 servers (6 hours each at $15/hour): $360
1 event coordinator (10 hours at $22/hour): $220
This totals $996, without even accounting for prep time, cleanup, or event planning. It becomes clear how crucial it is to factor these costs into pricing.
Overhead Cost Guidelines
Overhead expenses are those that keep the business running but aren't directly tied to any single event. These include rent for kitchen space, utilities, equipment maintenance, insurance, and marketing costs.
A useful strategy is to allocate a portion of overhead to each event. For instance, if monthly overhead is $10,000 and a catering business typically handles 20 events a month, about $500 of overhead costs should be built into the price of each event just to break even.
Also Read: Food Cost Is King In The Food Industry, So Why Is It So Hard To Figure Out?
Pricing Methodologies for Caterers
Next, you’ll need to pick an effective pricing strategy to build your menu around. Here are three common approaches we see.
Cost-Plus Pricing
This pricing method involves adding a predetermined markup to the total cost of producing a single menu item. The focus is on the individual item.
Formula: Selling Price = Total Cost + (Total Cost × Markup Percentage)
For example:
Total cost of chicken entree: $11 (food $5, labor $4, overhead $2)
Desired profit margin: 30%
Calculation: $11 + (30% of $11) = $14.30
Final price: $14.99 (rounded up)
The strength of this model ensures costs are covered and profit is made. The weakness is that it doesn’t take perceived value into account, and if you aren’t really precise with cost controls, could lead to pricing that’s too high for customers.
Gross Profit Margin Pricing
This model focuses on achieving a target gross profit margin for the overall business, typically 65-70% for catering. The focus is not on an individual item, but the whole menu or operation.
Formula: Price = Total Cost ÷ (1 - Desired Gross Profit Margin).
For example:
Total cost: $11
Desired margin: 68%
Calculation: $11 ÷ (1 - 0.68) = $34.38
Final price: $34.99
The strength in this method is that it ensures overall profitability across the business. The weakness is that, like with Cost-Plus Pricing, it may lead to inflated pricing compared to market rates if you don’t have a strong ability to keep costs under control.
Market-Based Pricing
This method involves researching competitors' prices and positioning yours accordingly. You may choose to be right in the middle of the market to make pricing a non-issue. You may price below-market to appear more palatable to budget buyers. Or you may price above-market to aim for a premium value perception.
Formula: none
For example:
Competitors' range for similar entrée: $30-$40
Your price (comparable quality): $35
Your price (superior quality): $38-$42
This model helps you stay competitive and aligned with customer expectations. However, if the market is in the habit of under-charging and suffering low margins, you may be stuck in the same boat.
In reality, catering businesses tend to use a combination of each of these. Cost-Plus to ensure per-item expenses are covered. Gross Profit to make sure the whole business works. And Market-Based to remain competitive.
Also Read: Master Your Food Costs: Formulas, Calculations and Percentages
How To Engineer Your Catering Menu
Menu engineering is the practice of carefully designing and pricing menus to ‘engineer’ your target outcome. This process is crucial in any foodservice setting, but is particularly effective in the catering industry due to the event-based nature of the business.
There’s a common framework for thinking about menu items and how they should be engineered in relation to each other:
Stars: High popularity and high profitability.
Example: Beef tenderloin
Strategy: Feature prominently in menus and marketing
Plow Horses: High popularity but lower profitability.
Example: Chicken marsala
Strategy: Find ways to reduce costs or slightly increase prices
Puzzles: Low popularity but high profitability.
Example: Vegan wellington
Strategy: Improve placement in menu or enhance item descriptions
Dogs: Low popularity and low profitability.
Example: Basic garden salad
Strategy: Consider removing or reimagining these items
Balancing high and low food cost items is another crucial aspect of menu engineering for catering. A smart strategy is to pair high food cost items with low food cost accompaniments. For example, a high-cost item like lobster tail could be paired with lower-cost sides like risotto and seasonal vegetables. This balance helps maintain overall profitability while still offering premium options that attract clients.
Creating profitable package deals is particularly effective in catering. These packages can combine high-profit items with lower-profit ones to increase overall margins. A "Premium Wedding Menu" package, for instance, might include a low-cost appetizer like bruschetta, a choice of high-cost mains like beef tenderloin or salmon, moderate-cost sides like roasted potatoes and asparagus, and a moderate-cost dessert like tiramisu. By pricing the package strategically, caterers can ensure profitability across all selections.
Also Read: Actual vs. Theoretical Food Costing: Why Accuracy Is Essential
Pricing Different Components of Catering Menus
A well-structured catering menu typically includes several components, each requiring its own pricing strategy. Understanding how to price these different elements can help ensure overall profitability while offering clients a comprehensive and appealing menu.
Appetizers and Hors d'oeuvres
Appetizers often set the tone for an event and can significantly impact guest satisfaction. When pricing these items, consider:
Preparation time: Intricate, hand-crafted hors d'oeuvres require more labor and should be priced accordingly.
Ingredient cost: Premium ingredients like seafood or specialty cheeses warrant higher pricing.
Quantity: Price per piece, but also offer package deals for larger quantities to encourage higher sales.
A common strategy is to price appetizers at 15-20% of the total per-person menu cost. For example, if the overall per-person price is $100, appetizers might account for $15-$20 of that total.
Main Courses
Main courses are often the centerpiece of the menu and a key driver of overall pricing. Consider these factors:
Protein costs: Typically the most expensive component. Price higher-cost proteins like beef tenderloin or seafood accordingly.
Preparation method: Complex cooking methods that require more time or skill should be reflected in the price.
Accompaniments: Factor in the cost of sides and sauces that complement the main protein.
As a general rule, main courses often account for 40-50% of the total per-person menu price. Using our $100 per-person example, the main course might be priced between $40-$50.
Desserts
Desserts can be a profit driver if priced strategically:
Offer a mix of labor-intensive and simpler options to balance costs.
Consider outsourcing specialty items like wedding cakes to manage costs and complexity.
Price desserts at about 10-15% of the total per-person menu cost.
In our $100 per-person example, desserts might account for $10-$15 of the total.
Beverage and Bar Service
Beverage service can significantly impact profitability. Non-alcoholic beverages are often priced at about 10% of the total per-person cost.
Alcoholic beverages can be priced a few ways:
Per-drink pricing
Hourly open bar rates
Package deals (e.g., beer and wine only, full bar)
Bar service often has higher profit margins, sometimes marked up 200-300% over cost. However, make sure to check with local regulations about alcohol service and pricing. When offering full bar service, it might account for 20-30% of the total event cost, depending on the duration and type of event.
Also Read: The Catering Opportunity: How Food Businesses Are Regaining Profitability
Tech and Tools To Make Catering Profitability Come Easier
Don’t try to manage this all in spreadsheets. Please, just don’t. Your vendor pricing is too finicky, your menus too complex—your operation deserves better. And in today’s era of breakneck efficiency, you can’t afford not to use tech and tools to optimize your menu. Here’s what we recommend:
Recipe/Menu Management Software — Essential for accurate pricing, menu costing software allows caterers to input recipes, connect vendor product databases for real-time food costs, calculate food cost percentages, and generate price recommendations based on target profit margins.
Inventory Management Software — Overbuying and overproducing is a huge source of wasted margin for caterers. These systems help control costs and maintain profitability through real-time inventory tracking, automated reordering, and waste analysis.
There are many tools in each of these categories to pick from, but the highest-performing catering operators find that integrating the tools into a singular culinary workspace is the best approach. This is where Galley Solutions comes in.
Galley offers a comprehensive Culinary Resource Planning (CRP) system that combines the power of a recipe database, menu manager, food costing tools, inventory management, and purchasing management—all in one platform.
By centralizing these critical functions, Galley empowers catering businesses to streamline operations, optimize menu pricing, and boost overall profitability. Start using Galley for free.
Also Read: The Best Food and Menu Costing Software
Growing Revenue Through Add-On Services
Catering is all about the food—or is it? Smart catering providers know there’s revenue to be gleaned through add-on services. And though they probably won’t make or break your business, they can be a steady stream of revenue you wouldn’t have had otherwise.
Rental Fees — Bring linens, tableware, furniture, and decor for a rental fee. Calculate the cost of purchasing and maintaining these items, factor in wear and tear, and aim for a return on investment within a specific timeframe (e.g., 10-15 rentals). For example, if a set of linens costs $100 and you want to recoup the cost in 10 rentals, price the rental at $15-$20 to account for cleaning and potential replacement.
Coordination — Partner with florists, musicians, artists, photographers, and other event service providers to bundle services together. Clients don’t want to manage endless vendors, so if that’s something you can own the responsibility for, they will pay for the privilege of not having to manage more people on their end. Pricing for these services can be based on a percentage of the service cost (e.g., 15-20% for vendor coordination) or a flat fee based on the complexity and time involved.
The key is to monitor the costs and effectiveness of these services like you would your menu. Control costs, swap out partners that are inconsistent, and try to find the Stars.
Also Read: The Role of Technology in Modern Foodservice Is Changing (Forever)
A Final Note
Pricing is not a one-time task, but an ongoing process that requires regular review and adjustment. Vendors change, recipes change, and customer preferences change. The best caterers we know price their menus in real-time through CRP tools like Galley, make frequent adjustments to stay within their margin goals, and are always mindful of how the market evolves in context with their menu.
By integrating recipe management, menu planning, food costing, inventory control, and purchasing into a single platform, Galley empowers caterers to make data-driven decisions that enhance profitability.
