Restaurant Sale Prices?

breezyb(z6/7VA)February 26, 2005

How do you determine what is a fair price for organic produce you want to supply to a restaurant?

Would you charge the same as you would at a retail Farmers' Market? Or do restaurants expect to pay a wholesale price - 1/2 of retail at least?

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robin_maine

Wholesale doesn't have to be 50%. That's a guideline but not a set rule. Figure out what your costs in growing are, including a sustainable wage for yourself. If possible, find out what the going rates are in your area. Once you've done your work you're ready to talk to the chef/buyer.

    Bookmark   February 26, 2005 at 4:02PM
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ohiorganic(5/6 SW Ohio)

If you are selling the restuarant case lots like a wholesaler than charge closer to wholesale prices but if you are selling smaller amounts charge retail. The chefs to whom I sell to do not complain about paying retail because the food is so sup[erior to what the whiolesalers sell them.

    Bookmark   February 26, 2005 at 4:10PM
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breezyb(z6/7VA)

I meant to post my message under the already-begun post on restaurant prices - hit the wrong darn button (it's been a tiring day slogging thru the slush & mud here - lol).

Anyhow - would these same guidelines also pertain to retail markets? We are lucky in that we have at least 3+ small organic markets in the area that specialize in local meat, poultry, eggs, & produce in season. I notice from purchases I've made from them in the past that they usually only have relatively small quantities of each item - herbs, fiddleheads, heirloom veggies, unusual Asian veggies, etc., so I imagine they are probably not buying in large lots. And their retail prices are high. I was thinking that that might be another possible market for me, especially since they are all within very reasonable driving distance.

    Bookmark   February 26, 2005 at 4:20PM
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GrassIsEvil(z6 TN)

I have the loveliest customer. Sells three slices of beefsteak tomato and two slices of Vidalia onion for seven dollars and fifty cents. Care to calculate how much that tomato cost at the per slice rate? And this is in the economically depressed part of the state.

Now, organic produce and eggs generally costs four to five times as much as non-organic produce and eggs in the marketplace. Do some comparison pricing in your town to see what the market is. Since you know the usual wholesale price is half of retail, then you now know pretty well what the stores and restaurants are paying.

Now to figure what you're going to charge. Try this:

First, (emphasis, emphasis, emphasis), calculate your costs. Include insurance, depreciation of equipment, mortgage payments--all of it. Exclude any unpaid labor (yours).

Now, determine your estimated yield. That will be hard. If you have to use something besides your own figures from last year's crops, be conservative in your expectations. Now subtract ten percent for losses, ten percent for waste, and ten percent for errors.

Calculate your cost per pound or per dozen or whatever unit for the crop. That's a baseline figure. Add half a cent. Now, condition yourself to think, "One penny less and I am losing money."

Now multiply by three. That covers your pay, your profit, and your cushion for next year. That would be your ballpark retail selling price, the price you would like to charge at a farmers' market. (If it's below the common price, good for you. Raise your prices and enjoy the extra profit. If it's above, that's about par for the course. Adjust as necessary.)

Half of that would be your ballpark wholesale selling price (which still gives you a little bit above cost).

Now, the question is, how does that compare to the estimated wholesale price for your market? If it's higher, then you need to either convince the customer why they should pay you more, i.e., better taste, fresher, delivery twice a week, or you need to sacrifice a little. If it's lower, either sell at the wholesale price and remind the customer of what a good deal she's getting, or convince the customer he's getting such wonderful stuff he should be glad to pay more more and increase your profit.

If you're feeling depressed after looking at your calculations, remember, the more special your product is, the closer to retail you can charge. You, after all, are offering personal service, local produce, the opportunity for the chef to inspect your gardens, all these things will let you charge more. I would still give the restaurant or store a discount of at least twenty percent from my retail price, though, unless I was the standard by which others were judged.

I realize that wasn't a very good answer, but it's as good as I can do

Ray

    Bookmark   February 26, 2005 at 9:29PM
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