A clarification on margins and budgets
To the editor:
Readers of two articles on foodservice in the March issue of The Natural Foods Merchandiser were almost certainly left confused by the presentation of department financials. In ?Is foodservice in your future?? NFM presented incomplete information in the interview with me. NFM should have published a fuller description of my recommended foodservice budget, which was essentially identical to that presented by Steve Rosen of Rosen Enterprises in the article ?Organic delis can serve up profits? in the same issue.
That is to say: From sales, a typical foodservice budget for cost of goods is 33 percent, leaving a gross margin of 67 percent. Delis typically apportion another 33 percent of sales for labor, leaving a contribution margin of 34 percent. Many delis, including those who adhere to a budget as Rosen specified, call that their contribution margin, and pay for all other supplies and overhead from that. NFM erroneously left out my mention of a 7 percent budget for packaging and supplies, which equals the 25 percent of sales NFM quoted—what I and many retailers define as a ?contribution margin.?
You can download free financial documents on foodservice budgets and formulae from my Web site at: http://homepage.mac.com/aseidner/FreeDocs/Menu148.html?. In ?Organic delis can serve up profits,? NFM?s definition of ?gross margin? was not correct. Gross margin is, of course, sales minus cost of goods. Labor, operating and other expenses are paid from gross margin—and are not deducted in calculating it. And to be completely clear, NFM should have highlighted the fact that the ?cost on the plate? recommended by Bill Stewart of Real Foodservice Inc. represented a completely different and contradictory model to that presented by Rosen and me.
I invite you to contact any of the sources for further clarification or info at: Steve Rosen, Rosen Enterprises, 954.967.8800, [email protected]; Allen Seidner, Thought for Food Consulting, 415.257.8815, [email protected]; and Bill Stewart, Real Foodservices Inc., 303.938.1735, [email protected]
Thought for Food Consulting
Numbers confusing in foodservice story
To the editor:
I wanted to drop you a line to let you know what a great job Aaron Dalton did in the ?Organic delis can serve up profits? article (NFM, March 2005). He got his facts straight and accurately represented the facts that I presented. Several of my clients at Natural Products Expo West asked me about integrating more organics in their delis.
I wanted to comment about some of the facts that Nancy Nachman-Hunt presented in ?Is foodservice in your future?? (NFM, March 2005). The entire representation of the cost ?on the plate? is way off base. A plate cost of 35 percent does not include labor costs, never has and it never will. I spoke with Allen Seidner at the show, and he insists that he was misquoted. I know Allen very well, and I am sure that there was some confusion on the writer?s part. Allen simply knows better than this. More importantly, operators struggling with their foodservice departments are sure to be more confused than ever. Perhaps a correction might be in order.
Thanks for listening,
Natural Foods Merchandiser volume XXVI/number 5/p. 18