Cost of goods, labor, and pricing

Key Cost Categories

1. Cost of Goods Sold (COGS)

• Includes all ingredients and consumables (coffee, milk, syrups, filters, cups).
• Target range for cafés: 25–35% of sales.
• Example: If a latte sells for $5 and ingredients cost $1.25 → 25% COGS.

2. Labor Costs

• Includes wages, benefits, and training expenses.
• Target range: 30–35% of sales (varies by market and wage laws).
• Efficient scheduling helps balance peak vs. off-peak labor demand.

3. Overhead

• Rent, utilities, equipment depreciation, insurance, marketing.
• Often 20–25% of sales.

Pricing Strategy

• Retail pricing must cover COGS + labor + overhead + profit margin.
• Formula: Price = (COGS ÷ Target COGS %) Example: $1.25 latte cost ÷ 0.30 target COGS = $4.17 → round to $4.25–$4.50.

Profit Margins

• Healthy cafés aim for 10–15% net profit margin.
• Achieved by optimizing both costs and revenue.

Balancing Costs

• Lowering COGS: Negotiate supplier contracts, reduce waste, portion control.
• Managing Labor: Smart scheduling, cross-training, technology support (POS integration).
• Pricing Decisions: Account for customer willingness to pay, competitor pricing, brand positioning.

Monitoring Tools

• Weekly COGS and labor % reports.
• POS systems with recipe-level costing.
• Break-even analysis for new menu items.

Summary

Café profitability relies on balancing COGS (~30%), labor (~30%), and overhead (~25%), leaving room for profit. Smart pricing strategies, efficient scheduling, and waste reduction are essential to remain sustainable and competitive.

• Tags:
• Milk Syrups
• Coffee Milk
• Monitoring Tools