Price and manage delivery risks — Food & catering

By the end of this lesson, you will be able to calculate a price, test its return and address a delivery risk.

Common to all countries

Build the cost before choosing the price

Start with quantities, paid time, third-party costs and delivery assumptions. Include mobilisation, supervision, compliance, warranty or support, overhead and the end of the contract where relevant. Separate fixed costs from costs that vary with usage. Forecast volumes are not minimum orders unless the contract makes that commitment.

In this exercise, target margin means profit divided by selling price. A 20% margin therefore requires price = cost ÷ 0.80. Adding 20% to cost is a markup and produces a lower margin. Taxes, discounting and financing are excluded from these teaching sums; add the applicable items to a real bid. Test one credible adverse scenario and decide who controls its cause and how the contract allocates it.

Worked example — Supply lunches to three schools

This is a fictional teaching case. Quantities, prices and contractual conditions below are assumptions for the exercise, not legal requirements or market benchmarks.

The teaching calculation covers 10,000 meals. A fall in volume leaves fixed kitchen and transport costs spread over fewer meals. Model a lower-volume case before offering a fixed unit price.

Item	Cost (currency units)
Ingredients for 10,000 meals	18,000
Kitchen staff and facilities	14,000
Transport and administration	8,000
Total	40,000

Total cost is 40,000. To retain 20% of the selling price as profit, price is 40,000 ÷ 0.80 = 50,000. If “Additional dietary production capacity” adds 4,000 to cost without a price increase, profit becomes 6,000, or 12% of price. Preserving 20% would require 55,000, only where the procurement permits that price. A cost increase does not automatically entitle the supplier to a contract price increase.

Country specific — what to verify

Verify food-business registration or approval, hygiene, allergen information, nutrition and dietary obligations for the destination and buyer. Check labour rules and any locally imposed sourcing criteria. Environmental criteria do not replace food-safety requirements.

Employment, inspections and local supply conditions. Use the destination-country module and the actual tender pack. The sources below are references with their own scope; they do not form a single worldwide regime. For the general method, revisit the foundations.

Put it into practice

Calculate the price for 20% of selling price as profit, then add 4,000 to cost. Calculate profit at the unchanged price and write one risk-control action.

Model answer

Total cost is 40,000. To retain 20% of the selling price as profit, price is 40,000 ÷ 0.80 = 50,000. If “Additional dietary production capacity” adds 4,000 to cost without a price increase, profit becomes 6,000, or 12% of price. Preserving 20% would require 55,000, only where the procurement permits that price. A cost increase does not automatically entitle the supplier to a contract price increase. The teaching calculation covers 10,000 meals. A fall in volume leaves fixed kitchen and transport costs spread over fewer meals. Model a lower-volume case before offering a fixed unit price.

Keep this worksheet in your working file. The quiz below checks the lesson’s decisions; passing it is neither a professional qualification nor a guarantee of an award.