12oz Mocha Recipe

Today’s recipe is quite an eye-opener. Last week, I indulged in my occasional treat, a Mocha, at a café. While I don’t give into the chocolate urge too much, I do appreciate a good Mocha. As I sipped my delightful beverage, I couldn’t help but ponder its cost – a mere €4.20, which seemed incredibly reasonable. This prompted me to grab my recipe calculation sheet when I got home.

Back when we started our business many years ago, our accountant advised us to maintain a labour cost of 30%. But the big question was, 30% of what? Well, it’s 30% of the net price (excluding VAT) of our menu items. For instance, if we sold a main dish for €10.00 (way back in 1998!), the cost of labour to make it should ideally have been €3.00. That confused us a bit – we were a team of 6 and although there was no minimum wage back then, the average hourly wage in hospitality was around €6.00. The food we produced took way over 30minutes of one person’s time per dish. However, this calculation involves aggregating sales over days, weeks, and months to ensure that your daily, weekly, and monthly labour costs does exceed 30% of the total. It also includes your drink sales – thankfully!

It’s also essential to note that labour cost isn’t just about hourly wages; it also includes employer PRSI and holiday pay as well as any other ‘perks’ you include for your team to ensure that their working environment is a pleasant one. So, let’s break down the numbers.

For simplicity, let’s assume our barista is on minimum wage and works part-time, earning less than €441 per week. The employer also pays 8.8% Employers PRSI and provides 8% holiday pay on all time worked.

Now, if our barista is making €11.30 per hour, that translates to €0.19 per minute. After factoring in holiday pay and Employers PRSI, the actual cost per minute becomes €0.23. Add in a Christmas Party, Tax Free Vouchers – say another 1% now my cost per minute is €0.33 per cent - you can see why it’s hard for hospitality to keep down labour costs – and to be honest most employers in this space try so hard to ensure their team is happy with their salary and working environment.

Having run hospitality businesses for 25 years, we’ve never managed to keep our staff costs within the recommended 30%. We often struggled to bring it below 50%. For us, it wasn’t just about ingredients; the customer and staff experience was equally important. In my calculations, I’ve accounted for a 40% labour cost. As you can see, with this labour cost, my recent treat of a Mocha might have cost the café 4 cents of their money to make! In plain English this café is may have made a loss not a profit on this product alone.

So, what’s the takeaway here?

In the world of hospitality, as in all businesses, there’s a delicate balance between the cost of goods sold and the cost of the team producing them, whether it’s a product or a service. If the café operator had a better labour margin, say at 35%, as opposed to my calculations at 40%, they would have made a profit of 14 cents, which is roughly 3.83%. It’s a tough business.

Now let me know what you think, it the €4.20 too cheap?