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Add Up Your Revenue
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Pricing Your Nonfood Program
How to calculate costs and pricing.
You know that sound management principles are imperative to running a successful foodservice operation. So you seek to live by them every day. But are you as comfortable and knowledgeable about your operational finances? Financial accountability is key to any thriving business, so it’s vital that you know the important numbers that measure your progress.
Understand the Critical Numbers
First, you need to determine your revenue per meal, because it is what you need before you can decide on how to price your meals, or how to figure your cost percentages. And both of these numbers are essential for monitoring your operation.
It’s important to remember that revenue per meal is more than your receipts from the cash registers. It also includes federal and state reimbursements, adult meal sales, à la carte and non- program sales, catering, vending, and interest. It’s only when you have all this information in hand, that you can begin to add up your revenue accurately.
The following table illustrates the revenue for a federally subsidized lunch, using 2015-2016 rates. Your rate might be different, depending on your price for a paying meal, as well as state and local funding.
Understand the Critical Numbers
First, you need to determine your revenue per meal, because it is what you need before you can decide on how to price your meals, or how to figure your cost percentages. And both of these numbers are essential for monitoring your operation.
It’s important to remember that revenue per meal is more than your receipts from the cash registers. It also includes federal and state reimbursements, adult meal sales, à la carte and non- program sales, catering, vending, and interest. It’s only when you have all this information in hand, that you can begin to add up your revenue accurately.
The following table illustrates the revenue for a federally subsidized lunch, using 2015-2016 rates. Your rate might be different, depending on your price for a paying meal, as well as state and local funding.
Notes:
- If a school qualifies for severe need, federal reimbursement will be higher than shown.
- Alaska and Hawaii federal reimbursement rates are higher than shown.
- See www.fns.usda.gov/sites/default/files/cn/NAPS15- 16nslpchart.pdf, for more information, including breakfast and snack rates.
Prepaid meals – Remember that meals are reported as paid when the money is collected at the point of service, and not when the money is received, or prepaid. If someone charges a meal, the meal is counted and claimed at the time the meal is served. Adult meals should be priced, at minimum, at the cur- rent federal free-lunch reimbursement rate, plus the meal value of USDA Foods ($3.07 + $0.06 + $0.2375).
Meal equivalents – Most schools serve more than just the federally subsidized lunch. You might offer breakfast, à la carte, catering, and snacks, so you will need to convert these sales into meal equivalents to determine your per meal cost more accurately. Keep the following in mind:
- All student reimbursable lunches, suppers, and adult full- paid lunches, are counted as one meal.
- No-charge lunches for foodservice staff are considered “in-kind” meals, and are not counted as a meal equivalent.
- Three breakfasts count as two meal equivalents. Use the conversion factor of 0.66 to determine this. For example: 200 breakfasts x 0.66 = 132 meal equivalents.
- Snacks typically use a 3-to-1 ratio to determine meal equivalents:
400 snacks x 0.33 = 132 meal equivalents. - To convert nonprogram food sales, such as à la carte and vending, to meal equivalents, divide nonprogram sales revenue by free-lunch reimbursement. Include the six-cent reimbursement, if eligible, plus USDA foods value per meal.
- If you sell a second meal to a student who has purchased a reimbursable meal, you must classify it as non-reimbursable food. Many schools use the adult meal price for the second meal sold to a student.
When you have completed the tasks listed above, you have done most of the financial “heavy lifting.” Now you only have one more calculation to make to arrive at your revenue per meal. Divide the total revenue you have generated, including all reimbursements, by the total meal equivalents, and you will have your revenue per meal.
Analyzing and managing your revenue on a regular basis will help you to draw a more realistic financial picture of your operation. And having this information in hand can guide you when making future decisions on cost reductions or program improvements.
©Kim Hofmann, RDN, LD.
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