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Cost Controls

7 Steps for Accurate Costing and Pricing

July 8, 2014 By: Nightclub & Bar


Beverage costing and pricing strategies Professor Brian Warrener of the School of Hospitality at Johnson & Wales University has worked in almost every position within the hospitality industry, starting his career in 1985 as a waiter.  As a leading industry expert, Warrener broke down the old reality of hospitality versus the new reality at the recent Nightclub & Bar Show

In the past, fewer offerings existed; there were far less premium cocktails and beers on the menu. Today, customers are savvier and expect – and demand – premium products and premium mixers presented to them by mixologists.  That translates to higher costs, higher prices and much higher stakes.  “Today’s customers are more educated so you have to give them more information,” Professor Warrener stated, “You have to be more educated.”

Budgeting is the key to handling the higher costs and stakes owners are facing today.  However, remember to be reasonable: “Try to capture every cost that you have, not every penny.”  In other words, when writing a budget simply cover your costs of doing business and capture every category rather than every cent.  One simple way to examine your costs is to create recipes for all of your cocktails, applying the cost of goods sold to the entire cost of each drink.

Ultimately, in today’s competitive landscape of premium products higher costs and higher prices mean higher stakes. You need to implement a comprehensive model for pricing your offerings. Here are seven steps to accurately determining costing and pricing strategies:

1.       Write a Budget

2.       Determine Accurate Costs

3.       Apply an Appropriate CGS% (Cost of Goods Sold)

4.       The Importance of Contribution Margin

5.       Check the Competition

6.       Establish Selling Price

7.       Evaluate the Results 

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