Reaping Good Margins from The Food Business
Starting a food business is a good investment because food is a basic necessity. For realization of good returns from this venture, a few considerations should be taken to account. Profits are generated when the total cost of production is less than the amount collected from sales. Profit margins can also be expressed as a percentage by dividing the selling price with the buying price, then multiplying the result with 100. A margin between (15-20) % can be regarded as good returns after every expense has been accounted for. For an entrepreneur to achieve a margin within the above range, here are some factors to put into consideration;
1. Rent of the restaurant, in case you are selling food from rented space, the rent must not be too high. Renting high-end business spaces meant for offices may not be a good idea. Look around for a place that is within your budget whose rent will not be taking all your profits. In the case of vending, the cost of delivering the food must not be too high. For example, it may not be wise to deliver two burgers using a car whose consumption is higher than other automobiles. In such a case, a cheaper means of transport like walking or cycling is a good way to reduce the cost of transport.
2. Buying price of foodstuff, the cost of commodities that will be used for preparing dishes should not be very high. Items like cereals, rice, cooking oil, salt as well as vegetables should be acquired at the least price possible. This does not mean that quality should be compromised, it simply means that it is cheaper to buy in wholesale than in retail. Go further than the market to the farmer if you can, this will rescue you from the unscrupulous business people at the market. At the farm, you can select what vegetables you want, in terms of freshness, as well as receiving discount. When market forces hike the prices of certain commodities, you may consider increasing the prices of food, otherwise you may end up making losses.
3. Amount spent on paying employees, your workers are all the people who assist in all the operations in your hotel. Depending on the status of the hotel, it is possible to find many names on the payroll. Security guards, waiters, chefs, managers, drivers, porters, as well as cleaners are some of the employees that you are likely to find in the hotel industry. Ensure that all your profits do not end up as salaries for these people. Here, the wise thing to do is to hire just enough, do not hire a lot of people for work that can be done by one person. When you are starting, you may not require many waiters, but as customers increase, a need may rise for additional employees.
4. Prices of fuel, the food industry heavily depends on heat to prepare food. Decide on the most efficient as well as cheap means of cooking. Boiling cereals with the gas cooker for a long time may prove expensive, a charcoal burner is a better option. When using the charcoal burner, remember to have sufficient ventilation, it emits deadly carbon monoxide gas. It is advisable to use it in an open space where there is plenty of air.
Fast foods may be prepared using electricity, like the case of deep-frying. A microwave is a fast and cheap means of warming beverages or frozen food. Proper research is another key factor in the realization of good returns from the food business. Find out about a few aspects about your targeted customers, like knowledge about culture will prevent you from wasting your capital on pork products in Islamic regions. Inquire about the prices of food from neighboring hotels, it would be very disappointing selling the same type of food at a price that is twice that of your neighboring restaurant. Comparing prices will help you understand the current situation so that you don’t end up selling too high or too low.
Familiarize yourself with the government policy so that you can acquire the relevant documents. A good budget should cater for all the payments that will be made in government offices. Invest in quality before quantity, ensure hygiene is maintained, prepare nice dishes and present them in a way that automatically makes people salivate. Taking these considerations keenly, you will be smiling your way to the bank to deposit more wealth accumulated from the good margins your food business will be making.