The Business of BBQ

[Mo Smoke]

I keep hearing there is a lot of money in BBQ. I do it for the love, but right about now I could use the money too! Can anybody tell me some real deal info and answer some questions for me about the business of BBQ?

[Squiggle]

I run a cafe/restaurant in which I do BBQ stuff & the hardest thing was getting your name out there so people know what you are doing, after three months it's starting to gain momentum in the BBQ side of things. I don't think I could give you any more relevant info as I'm in Australia, but good luck if you decide to open up your own place/food van.

[Stewart]

What questions do you have mo?

[Mo Smoke]

Ok here is my first question:

How do you determine what your true cost is for various menu items so you can know how much profit you are making, especially since some supplies you use will last for several cooks. For example-let's say you buy a case of ribs for $80. You get 8 slabs. Divide and get a cost of $10 for each slab. But what about the cost of the rub, marinade, foil, coals, wood,and sauce?


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[Stewart]

Are you selling by the whole rack half 1/4 rack. Buying in bulk obviously is the way to save money. Perhaps adding the cost of each of the items used and diving them up per rack of ribs? I primarily deal in whole hogs but dabble in everything else too. Honestly if the foods good the price to the customer doesn't matter they will pay. I ask my family friends and customers what they think they would pay for an item and use that too to figure out a cost.

[Frank_Cox]

I keep hearing there is a lot of money in BBQ. I do it for the love, but right about now I could use the money too! Can anybody tell me some real deal info and answer some questions for me about the business of BBQ?

I could wear you out with this topic

anyway, the best way to start off for knowing absolute cost in my opinion is make several rounds of product and carefully document your process and the time it takes you. However, there are some "Benchmark" rules that you can use for starters and base projections on.
let's start here.... (you will find out as time goes, these rules apply to a lot of different types of business models and industries)

rule 1- basic markup for projection purposes is food cost x 3 = retail. this is a great "report card" to compare your business' performance by.
rule 2- true cost is best calculated on the average over time. say per week/month/year. this can help figure in things like waste, busy and slow times, product cost, etc.
rule 3- know the cost of things you can control. Product cost, rent, utilities, insurance, fuel, etc. These can be easily projected to help you determine the required sales to cover them. the things you can not control as easy are employees, customers, weather, equipment repairs. etc.
rule 3- use industry examples to project things you can not nail down actual costs on. ask people that are already doing what you want to do for an estimated % of sales to start with.
rule 4- categorize everything in your plan by the 3 P's= Product, process, and people. you can control the first 2 but the 3rd P is unpredictable.
rule 5- always work hard and be mindful of the little things both small costs and customer satisfaction.


Lets start there..... hope this helps

[Mo Smoke]

That is great info to have. I'm just looking at selling as a backyard guy for starters with my eye on a food truck and festivals. I plan to start small and learn before I jump out there on the big stage, but whenever I talk to my potential investor about all the money that can be made he wants to hear it in business terms of profit, cost, expense, etc. I have no idea about all of that yet. But I know of one guy who started in his backyard and got so busy he had to open up a full time take out place...and another guy who sells from his backyard told me he made 100k last year.


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[ajfoxy]

Excellent advice there Frank. And as you say it can be carried over to other business models as well.

[Mo Smoke]

Come on guys...gotta be more of us out there selling some Que.. where are all of the Food Truck Vendors, Festival vendors, caterers...anybody making money off this thing we love. Frank maybe we should move this discussion to a more popular area to pick up more input.


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[Mo Smoke]

Frank... does that rule of 3rds account for labor and profit? (cost x 3 equals retail)


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[Rodcrafter]

Mo,

My experience is that the more you cook at one time the better you can come out. I mean it takes the same amount of time in the smoker for one butt as it does for 10 and the same amount of wood/fuel. That being said If I'm only cooking small amounts it isn't worth doing it for the money. But if I cook a case of butts, one day while at work, pull them and sauce a little, pan them and freeze them. Then the night before the event, cook the briskets and put the butts in the smoker 4 hours before feed time while cooking some pans of beans and such and make up some sides while in the mix, I can make 2500 for the day without too much trouble. But i just cook for weddings and church and feeding the homeless not trying to turn my fun into a job.

jm2cw

[Mo Smoke]

Thanks for sharing your experience Rod. Most importantly tho...your wisdom.. I tell my friends and family all the time, I don't want to turn something I love to do into a job I hate. So I'm hesitant to go into the business of BBQ. But as I keep thinking about it, if I continued loving it as I made money then it would be the best of both worlds...eventually I'll test the waters to see. In the meantime I'm doing my homework to increase my chances of success when I do. And I'll try to let the need for a new transmission, brakes, a kid in college, and a wife that works when she wants to...cause me to jump of the bridge too soon!


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[Frank_Cox]

Frank... does that rule of 3rds account for labor and profit? (cost x 3 equals retail)


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Actually, just cost of product, labor, and other costs of goods sold. The other 60% left over will cover overhead and profit

[Mo Smoke]

Ok Frank..back to step 1. I'm confused especially about the 60% part.

Let's take a case of ribs for example at $80 for the case of 8 slabs . That's $10 per slab cost... take it from there.


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[Frank_Cox]

Ok Frank..back to step 1. I'm confused especially about the 60% part.

Let's take a case of ribs for example at $80 for the case of 8 slabs . That's $10 per slab cost... take it from there.


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Right so we can take the $10/ slab and make an assumption that our overhead and required profit to get the business bills paid we would need to sell for close to $30 each. Next you need to decide what your local market would bear. Using the x3 method will cover you for sure but you also need to be competitive. Full slabs might be easier on labor since you don't need to cut them up and package them individually so you might be able to cut that price back some especially if you aren't running a full blown business and bills are minimal.
The x3 bench mark method breaks down like this.
Start with sale price and work down to profit.....
Total sale price= 100%
Cost of goods sold= 30%
Labor and Overhead costs= 50-60%
Net Profit= 10-20%

30% cost + 60% overhead + 10% profit.

This is assuming you are running an established business.

Now if you aren't, then you can adjust these but keep in mind one day you might be close to these numbers. Being cheap now could mean big price hike to your established customers later.

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[Mo Smoke]

"I see" said the blind man. So if x3 gives me enough to make money as a legit biz, then as a backyard bootlegger working by myself, I could make a nice piece of change.... might even be able to fix that Tranny sooner or later !


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[Rodcrafter]

Either that or your price would be too high for the market base you have.

jm2cw


Making memories!

[Frank_Cox]

Either that or your price would be too high for the market base you have.

jm2cw


Making memories!

True, you need to work with the product you sell and the price you sell it at to find creative ways to sell the same thing for more profit. in other words, you might make more money selling ribs by the bone instead of by the slab. say you yield 12 bones and sell them by 3's then you might be able to get more money for the 3's at an event and sell more slabs to a cheaper audience than you could selling $25 to $30 per slab. of course ya need to find ribs as cheap as you can to cut your cost up front if possible.

[Squiggle]

I agree, turnover is way more profitable than margin, i.e. Sell more small portions at a cheaper price than full slabs for bigger profit per sale. Working off Franks formula, if you sell 40 x 3 bone plates with $5 profit per sale it is way better than trying to sell 10 x full slabs with $20 profit per sale cause people are more likely to buy a small lunch for $10 than a big lunch for $40.

(The prices are more in line with Aussie prices but you should get what I'm saying. )

[Mo Smoke]

That all makes sense. Around here BBQ guys sell rib sandwiches for $9 and slabs for $27-$28. While some people do prefer to buy slabs, a lot of their business is sandwiches also. Dinners which include maybe 4 bones and 2 sides for $12 are also popular.


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[Pete Mazz]

Good money can be made selling pulled pork. Prices are cheap and you can hold and reheat with no problems. Nothing beats a good pulled pork sammy!

[Rodcrafter]

And ask Frank some are better than others. LOL


Making memories!

[Mo Smoke]

That's my favorite too.. with some good sauce..and baked beans. Look out.. Fat boy in training!


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[Squiggle]

Definitely our best seller, you'll get about 20-30 sambos off a 10lb butt & with sides that's a tidy profit margin. They are our best seller, even better than burgers.

[temurf]

... you'll get about 20-30 sambos off a 10lb butt & with sides that's a tidy profit margin.

Feel free to laugh at my ignorance Squiggle, but my guess is that a sambo is Aussie for sammich.