bake - October 2016 - 10

management

Measuring Your Metrics
From food ingredient costs to labor expenses, the cost of

results by 4. That's your price. This calculation was a common

doing business as a retail bakery owner is perhaps the single

practice in the retail bakery business in the 1950s and '60s

most important factor in determining your success or failure.

when labor was more plentiful and wages were low.

As Rick Crawford writes in his comprehensive book, "Opening
and Operating a Retail Bakery," sales per labor hour are "huge

Basing the health of your retail business off of gross margins

targets. So many things have to be right. Your workflow, batch

became a much more common practice over the years, as

size, inventory levels are just the start."

labor costs and other intangible costs rose. In its simplest
form, gross margin can be calculated by taking your net sales

Crawford, managing partner of the RPIA Group, points out

and subtracting labor, materials (or ingredient costs) and

that when you achieve your dollars per labor hour targets, your

packaging. A good goal in this method would be to achieve a

wage percentage is always in line.

44-46% gross margin.

A good rule of thumb about key matrixes for retail bakeries

When determining net margins, always remember to factor

to follow can be found in the chart below. If your percentages

in all costs - both direct and indirect. According to studioD

match up, your operation is probably in pretty good shape. But

Accounting, the extra energy you use to run your production line

if your percentages are higher in key areas like payroll or ingre-

increases your utility bill and is a direct cost of production. When

dient costs, you may need to adjust retail prices or make other

an expense benefits several areas of your business, such as your

changes to ensure sustainable profitability.

rent or insurance, this is an indication that it's an indirect expense.
Some direct costs are fixed, such as the mortgage on your

Food Costs & Pricing

production facility or a shift manager's salary. Other expenses,

The US restaurant industry does a great job of tracking indus-

such as the cost of material you use to make your product, are

trywide matrixes and provides a valuable comparison for you

variable because they change based on your production levels.

to put your operation up against.
Restaurants are typically more expensive to run than retail

KEY BAKERY MATRIXES

bakeries, but here are the latest figures. Food and nonalcoholic
Annual sales of retail bakery

beverage costs represented a median of 32 percent of total

$500,000
32%

$750,000
33%

$1,500,000
39%

Ingredients

26%

24%

23%

Rent and utilities

10%

10%

10%

Paper/packaging
materials

7%

6%

5%

Finished goods

8%

8%

5%

Repairs

2%

3%

4%

food and nonalcoholic beverage sales in June 2016, up slightly
from 31 percent in April and May, according to a new National

Payroll

Restaurant Association survey.
At 33 percent, casual dining operators reported the highest ratio
in April. Fast casual operators came in the lowest, at 28 percent.
There are several different methods for retail bakeries to calculate food costs and determine profitable pricing parameters.
One is the 25 percent rule in which you determine yield per
batch and the cost to make each item and then multiple the

10 < OCT 2016 | bakemag.com

RPIA GROUP


http://www.bakemag.com

bake - October 2016

Table of Contents for the Digital Edition of bake - October 2016

bake - October 2016
The Promotion Issue - The Hiring Dilemma
Table of Contents
News Bites - Boudin Bakery Names CEO
Bantam Bagels Expands Distribution
AIB Launches New Certification
Equity Group Buys Wetzel’s Pretzels
Personality - Anne Heap
Management - Measuring Your Metrics
bake - October 2016 - bake - October 2016
bake - October 2016 - 2
bake - October 2016 - The Promotion Issue - The Hiring Dilemma
bake - October 2016 - 4
bake - October 2016 - Table of Contents
bake - October 2016 - Equity Group Buys Wetzel’s Pretzels
bake - October 2016 - 7
bake - October 2016 - Personality - Anne Heap
bake - October 2016 - 9
bake - October 2016 - Management - Measuring Your Metrics
bake - October 2016 - 11
bake - October 2016 - 12
bake - October 2016 - 13
bake - October 2016 - 14
bake - October 2016 - 15
bake - October 2016 - 16
bake - October 2016 - 17
bake - October 2016 - 18
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