Hi Steve! Great article on pricing events last week.
Can you explain to me how to apply the cost of my condiments ie onions,relish,sauerkraut,olives. Also the cost of daily ice to the selling price of the hot dog,brats,polish sausage,Italian sausage? My dogs are $2,Brats $3, Polish $2.50, Italian $2.50, chips $1, pop $1, Water $1, Kids freezee .50cts. I do not consider charging for the condiments a nice business practice.
Please advise me. Thanks!
Tony’s Vega, Tony’s dogs.
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I’m with you Tony. I don’t charge for condiments either. Even chili and cheese. My 8 to 1 dogs are $3, my quarter pound dogs are $4.
Let’s start with the basics. There are two kinds of expenses in your hot dog biz – Fixed and COGS. (For all of the following calculations we are working with a one month period.)
Condiments are a “cost of goods sold” (COGS), in other words a cost that varies directly with the amount of hot dogs sold. That is why COGS is sometimes called “variable expenses”. The more dogs you sell the more condiments you use, right?
Gross Profit = Sales – Cost of Goods Sold
Ice is not a COGS because you use the same amount no matter if you sell 5 dogs that day or 150. This is called a Fixed expense. Propane is another example of a Fixed expense. So is mileage driving to and from a daily location.
Therefore you can figure condiments into your gross profit margin calculation along with hot dogs, buns, chips, and sodas. After you calculate your gross profit you subtract all other non-COGS (Fixed) expenses to determine your net profit.
Net Profit = Gross Profit – Fixed Costs
Now here is something cool. If you know what your monthly Fixed expenses are you can determine your break even point. Let’s say you make enough income in the first five days of the month to cover your Fixed expenses for that month. This is your “break even point”.
You know that for the rest of the month you will be putting money in your pocket at your gross profit margin. If your gross margin is 70 percent, then you know that after day five you will be keeping 70 cents out of every dollar you make for the rest of the month.
Nice!
Now you can see the importance of keeping those fixed costs down, right? You’ll reach your break even point that much sooner in the month and start banking money at your gross rate.
-Steve “math is cool” Schaible
P.S. This is the kind of advanced training that hundreds of Hot Dog Profits Premium members have access to. Join us if you want to learn how to run your business like a business, not a hobby. http://HotDogProfitsPremium.com
P.P.S. For a limited time you’ll also get our Hot Dog Cash Tracker bookkeeping software for free. Makes keeping your books easy-peasy.
Tony, I think you need to raise your cost of dogs. I charge $3 for a dog $4 for a Brat and 50 cents for adding Chili Cheese. All other condiments are free. I was told a good rule is to figure about what a dog with bun and condiments cost you to make and you should charge at least 3 times that amount. How else are you going to pay for all those other expenses ( rent, storage, insurance, propane and everything else ).
Good Luck,
Bruce of Bruce’s Hot Dog Cartel.
ps. I figure that I charge 5 to 6 times cost on my dogs.
Having personally tasted Bruce’s dogs I can tell you they are worth every penny that he is getting for them.
I feel strongly about not charging extra for condiments. I leave that to McD’s and BK. I have 16 fresh, free condiments the customer can use. I don’t sell anything that does not have at least a 300% margin. The Grateful Dawg (with chili, cheese and bacon) costs me about 70 cents, and it sells for $3. It is a big juicy Polish dog. The club on whose property I set up provides me with free ice, bar towels, and even security. The owner invited me there 5 years ago, and I pay them nothing. A year ago, they ran an A/C outlet to my stand, so I no longer use by battery for electricity. I spend $15 on propane every 3 weeks. I work 2 nights a week, spend maybe $80 on inventory per 4 hour shift, and usually gross around $400 a night. My commute is about 4 miles from home. So my net from the Dawg cart for about 8 hours of cooking and selling is between $600 and $700 weekly. My BBQ sauce (Russell’s Cajun BBQ Sauce) is in 30 local stores so far, and I sell quite a bit of it from the Cart too. Have only been in BBQ sauce business since March, and internet sales have been booming. The shipping department (the wife) has been kept very busy!
You’re doing it right Russ. Good job!!!
I use the three times rule too, but since I began slinging some things have been added that have changed my profit margin a little. Next year I’ll have to go up a little on some things to get back to a good margin. Steve, as you know, most of us don’t like to raise prices on our customers, but I think I’ve developed a great relationship with them and they won’t quibble about 50 cents on the pork and specials. I’ve picked a couple of my best sellers, other than the hot dogs.
Everything else goes up every year. Have any of you stopped buying milk, coffee, cigarettes, chocolate, toilet paper, ground beef, or cable TV just because they raised their prices? Don’t be afraid to charge a price that will allow you to continue to serve your awesome food. Your customers want you to stay in business.
Great point!
Good thing I do my dogging more as a hobby to keep active. After starting every season almost 2000.00 in the hole(fees for events,ins,licenses,permits,state taxes,etc) My food costs are still a 68% profit. Overall I am happy to make 25% for all at the end of the season. I always enjoy the people I know who think that slinging is an easy job. I had a gig around the 4th of July almost 10 hours sold nine(9 that’s right!!)dogs. The next day made up for it over 500.00 in sales. Sell em’ all Jerry
Even a hobby hot dog biz needs to think about the numbers once in a while. Sounds like you have a good handle on yours Jerry!
Another excellent article, Steve ! I’m not a math wiz, and you explain things simply. (is that a word?). Sometimes all the numbers make me dizzy-but once again you set me straight. BTW- do you guys & gals believe it’s August already?!
Thanks Frank.
NO! What happened to summer this year? We had nothing but rain until July! Now I’m waking up in the dark already!
I agree about not charging for condiments. I call it “pinching pennies to lose customers”.
Clever!
what about cheese and chili? Do you serve those and do you charge?
I never up charge for chili, cheese, or any other condiment. I sell signature dogs so my base price covers it. I don’t think customers like up sells.
I don’t charges for condiments either, if a customer asks for a certain item I serve it it up for them. Where I make up the cost is with my specialty dogs, I have quite a selection of hot dogs to choose from and they all do very well. I sell one called the super dog for $4, and you can get it topped with anything you like…..good seller!
Awesome!
Hi guys and gals,
I finally took the first step and bought a nice cart with grill. Got a great deal! I took the food handlers (SafeServ) course and now must find a commissary kitchen and location. I will admit that while I have run food trucks and owned bar/restaurants I am somewhat nervous about getting started slinging. Can’t seem to find a commissary kitchen. Does anyone know of a good website to find events in all the states? The majority of the net profits from the cart will be going to a non profit that I have started. Any help would be GREATLY appreciated.
Thanks
Any health department approved kitchen can be a commissary. Don’t ask to rent it, offer to advertise for them on your cart, flyers, punch cards, etc.
For your gross profit don’t forget to add in the cogs price of the packaging or wrap that you use to serve your dogs, sacks, napkins, ect…
Yep. Anything that varies directly with quantity sold.
Mike R,
I have always had good luck using a local Subway or sandwich shop as my commissary. I have had to work a couple of ‘double booked’ events (no fun !!!) this summer and my commissary has provided me with a place to wash and sanitize my pans and utensils and get more ice in between gigs. Try a local sandwich shop that you frequent and I’m sure that the manager would be willing to work with you as your commissary each year.
Now on the subject of condiments…I do not believe in charging extra for condiments either. When ya buy a hot dog or a brat what ya put on it should be included in that price…period ! If you’ve got what you think is a ‘world famous chili’ then put it on your menu as such and sell it on the side but…charging for condiments…no way !
Ug! I hate math, but it is a necessary evil-lol. To charge or not to charge, that is the question. Anyway, you mentioned cigarettes in one of your responses. They are so nasty. Make sure you have a “No Smoking” sign that’s clearly visible to see, posted on your cart. And please don’t ever smoke at your cart! The sight, smell & taste of cigarettes will definitely keep potential customers away-like me. Just sayn’.
No kidding.
What does everyone use a steamer hot dog cart or a grill hot dog cart. I am about to jump in the business and trying to decide on a streaming or grilling the dogs.
You’ll find that everyone has their own preference. A lot depends on your location. Are the folks in your area used to one or the other? If so, sell what they’re already buying.
We jumped into the business a few years ago and we had to decide on how we were going to separate ourselves from the competition. We smoke our entire inventory on a Traeger made a huge difference, in texture, and form… we felt that presentation is key, but as Steve said above, everyone has their own preference.
Great way to separate yourself from the competition Mario!