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.
Steve I have just purchased a new custom hot dog cart yesterday and I would like to know the best way to clean the stainless steel from finger print smudges that were left on the cart from the building of the cart. I have tried vineger and water and it does not work so well. Do you have any suggestions to clean in showroom conditions before i take it to the Health Dept? Thanks for your help. 
Hey Slingers,
I need nine carts to work events in the Dallas Metro area on Sept 12th, 13th, 14th.
Hi Steve,
One of the best pricing strategies for a promo like this is the “ticket” method. Go to Walmart and buy a roll of movie tickets in the office supplies section.
