We are writing this to provide an idea on how cakes and other food items may be priced. Of course, each company or establishment would have their own way of pricing their products.
There are several factors that cover the price that you see displayed on the cake rack. Among these are: ingredients cost, labor cost, utilities cost and other incidental expenses.
To make it easier, let us suppose that the price you see on the tag is 100%. A portion of this should be allotted to the cost listed above and of course the mark-up for the income you intend to have because that is what business is all about right?
Say, your 10 pieces of cupcake with frosting costed you a total of PhP125. This means you used up PhP12.50 worth of ingredients to produce 1 cupcake, this is the Foodcost. Consider this as a portion of the 100% Price. It is accepted that the price for a regular menu item consists of three major components: food cost, overhead cost and mark-up. Thus the price is divided into 3 parts. Using the PhP12.50 foodcost, you can now determine the cupcake price by multiplying it by 3.
This means that for every purchase of the cupcake, you allot 12.50 for the ingredients, 12.50 for overhead and 12.50 for mark-up. The selling price for the cupcake is now PhP37.50.
In reality the portion that is intended for mark-up is re-invested into the operations to develop more cupcake flavor and other pastry item. The mark-up ensures that the business can sustain its operations.
This method of pricing is a simplified version of what goes on behind the complexities of identifying the cost. For custom-made cupcakes with figure toppers and more intricate design, the price includes specialized labor costs as it is now classified as an artistic product. Because professionals make it look so easy to make that intricate cupcake design, it does not mean that they can be paid easily as well.
The quality, taste, look and over-all design is achieved because of the caliber of workmanship. Just because it is cake, it does not mean custom-made cakes are not an art-form. This is why it is called Pastry Art or Cake Art.
Think of artists that use oil on canvass or those that use pointillism that requires painstaking time and effort to achieve the look with just dots. The technique in terms of level of difficulty can be the same. Only, for cake artists, the medium is edible and the only way it can last for a lifetime is if it gets photographed properly.
Cake Art is to be delighted and reveled on but shall eventually be consumed. This is why for most cakers, because of this being a business that bridges food service and art, there is a difficulty in making people understand that the prices may seem steep but the product that they are purchasing is already a “steal” with that amount.
A community of cake artists have agreed that custom-made cakes are truly a luxury. Thus, luxury pricing has to be expected. However, there is also a community that wishes to share this art to more people; to see smiles on more faces. Faces that are evidently happy to make that first slice. To do this, pricing has to be more affordable. But the balance has to be struck between this love to business sustenance. The dilemma is there.
The decision on how you price your products will always depend on how you manage the flow of operations. Are you going to exert more effort to make smaller or cheaper cakes? or are you going to choose on getting the higher priced cakes even if it isn’t that frequent?
In the end, it isn’t a question on how much you want to earn anymore. It is a question on how much you can sacrifice to deliver the cake art.