Watch the video or read the article below find out the importance of calculating your plate cost and how this can help your Restaurant finances.
What is plate cost?
Your plate cost is the cost to you as a business for preparing a particular dish for a customer. For example, if you are in the burger business then you would work out your plate cost by calculating how much the burger cost you to prepare for your customer.
Knowing your plate cost is vital for your Restaurants finances because if you are serving a dish, you must know how much that dish has cost your business.
Calculating your plate cost has many advantages such as being able to work our your menu price. If you have just guessed what your selling price will be, then work out your plate cost now so you can calculate how much profit you are making on the dish.
Your plate cost calculation also allows you to set budgets. Your yearly budget forecasts your sales, expenses and profits. With a plate cost calculation, you will be able to prepare accurate budgets for your Restaurant. With an accurate budget, you can now set and monitor your plate cost target to ensure you are not overspending in the business.
Example of Plate Cost
You are in the pizza business and one of your menu items is a 6 slice Pizza. First of all, you will need to identify the ingredients within your Pizza and then allocate a cost to each of the ingredients. Use your market research and identify what your plate cost % should be.
For example, the cost of the 6 slice pizza to make is £1.50 and you have researched that this plate cost should be around 30%. Take your £1.50 and divide it by 30% and you will get a selling price of £5. If this selling price is too high, you may look at reducing the selling price but this will then increase your plate cost %!
Note, that the profit you are making (£5-£1.50) £3.50 is your profit before paying for your variable and fixed costs in the business. Be careful because if your margin is not high enough you will not be able to cover your business expenses. If you would like a better understanding of the difference in variable and fixed costs, please click here.
The plate cost method above is a basic one. We can work with you in preparing a more detailed and accurate plate cost by factoring in wastage, price fluctuations, trends and much more. Get in touch for more information.
How to monitor your plate cost?
So now that you have your plate cost % you need to track the cost to check everything is ok. Before you do that, remember that your plate cost % is your ideal cost meaning that in the perfect world the cost to prepare your dish would be exactly the figure plate cost % figure you have calculated. However, in reality many things go wrong so you need to track your actual cost, which you can by looking at the cost of goods sold (COGS) figure in your profit and loss account.
We prepare your profit and loss in real time using cloud accounting technology. This allows you to see your COGS figure in real time and check that your actual cost is not very far from your ideal cost!
So now that you now how to calculate your plate cost, hit the like button and leave us a comment below, let us know what you think and if you have prepared this calculation for your Restaurant.