(Radio Iowa) – Iowa State University Extension’s Food Innovation and Business Hub has been offering online webinars to help businesses with figuring out how to get and keep customers. Food business specialist Alex Van Alstyne says part of the issue is knowing how to price what’s on the menu.
“Within the food industry and the restaurant industry, we tend to see a lot more overpricing of food. And sometimes that’s because we aren’t figuring out our total cost, especially our labor costs in those foods. And we over-inflate what we expect to be there,” he says. Van Alstyne says over-inflating the price is one of the factors that can leave customers unhappy.
“Customers tend to leave unsatisfied because they spent 20 dollars for a hamburger. But in actuality, you could gain more customers with 15 and we could have covered all the costs for your business,” Van Alstyne. Van Alstyne says you need to be very detailed in determining your total cost. “It really starts with documenting, tracking everything from your ingredients costs all the way up through your labor,” he says. “A good kitchen, a good business tracks even records on production lines, backed quantities, what they’re producing, when they’re producing, who’s managing that and who’s involved in the kitchen.”
He says there are ways to make changes when food prices increase without raising the price of a meal. He cites the hamburger again as an example. “We can look at our size and we can increase the value of what we see, or we can make minor adjustments to the burger. We can increase the volume of the bun, we can increase the portion size or even decrease slightly to see how customers react to that,” he says. Van Alstyne says they also teach businesses about the difference between margin and mark up.
“A lot of the industry and a lot of companies in food, say I have a 30 percent margin on something and they just multiply that out by their food and add 30 percent,” he says. “What they’re actually doing is increasing a markup. And what that means is your margin is actually around 20 to 22 percent based on calculations. So you’re leaving money on the table.” Van Alstyne says if you’ve done the work to calculate your actual food cost, then figuring out your margin is easier.
The next webinar in the series is June 11th. Find out more at extension.iastate.edu/foodinnovation/.
