A 12-ounce bag of tortilla chips costs $1.63 to a grocer, in masa, oil, the bag and frying time, and sells for $3.50, a 53.4% margin. The market keeps far more, 69.8%; 5-pound bags for restaurants keep 50.5%; and chips with a tub of salsa at the market keep 53.7%. The bag costs as much as the corn. Margin = (price − cost) ÷ price. In the example below, a month of four lines brings $22,450 of sales and about $12,550 of gross profit, before kitchen hours and the owner's pay.
The short version
- Margin = (price − cost) ÷ price; markup = (price − cost) ÷ cost.
- A grocer bag: $1.63, sold for $3.50, 53.4%.
- The bag costs as much as the masa.
- Market bags keep 69.8%.
- Chips with salsa sell as a pair at the market.
- TaroStack costs each bag from what each batch used. More below.
A bag, costed
Sol de Mesa Chips, the made-up tortilla chip maker in Tucson, Arizona, I use in these examples, counts frying and packing time in each bag:
| A 12-ounce bag to a grocer | Cost |
|---|---|
| Masa, oil and salt | $0.83 |
| Bag and label | $0.45 |
| Frying and packing | $0.35 |
| Cost | $1.63 |
The business's year is in tortilla chips business plan, and the 10-week date in tortilla chips shelf life.
Margins by channel
| Product | Sold where | Price | Cost | Gross profit | Margin |
|---|---|---|---|---|---|
| 12 oz bag | Grocers | $3.50 | $1.63 | $1.87 | 53.4% |
| 12 oz bag | Markets | $6.00 | $1.81 | $4.19 | 69.8% |
| 5 lb bag | Restaurants | $15.00 | $7.43 | $7.57 | 50.5% |
| Chips and a tub of salsa | Markets | $10.00 | $4.63 | $5.37 | 53.7% |
The restaurant bag keeps 50.5%; chips with salsa keep 53.7%, the salsa bought from a local maker.
A month's numbers
A month for Sol de Mesa Chips:
| Product | Units | Sales | Gross profit |
|---|---|---|---|
| 12 oz bag, grocers | 3,500 | $12,250 | $6,545 |
| 12 oz bag, markets | 700 | $4,200 | $2,933 |
| 5 lb bag, restaurants | 300 | $4,500 | $2,271 |
| Chips and a tub of salsa, markets | 150 | $1,500 | $806 |
| Month | $22,450 | $12,554 |
The grocers bring the most gross profit, 3,500 bags at 53.4%. Every 5 cents off the bag adds $175 a month across the grocer bags alone. Kitchen hours and the owner's pay come out of the gross profit. The salsa beside them is in salsa business plan.
Get the calculator
Download the tortilla chips margin calculator. One sheet: one line for each product and channel, with its price, materials, packaging, labor and fee rate; the cost, gross profit, margin, markup and the price your target margin needs fill in. It's an ordinary Excel file with no macros, and it works in Google Sheets, LibreOffice and Numbers.
Where this stops working
The calculator holds one cost per bag. Oil prices swing, a batch absorbs more oil when the fryer runs cool, and broken chips at the bottom of a case change every margin.
How TaroStack does it
TaroStack costs each bag from what each batch used, so margins sit on real cost.
True cost from the batch. Each batch takes masa, oil and bags at the price of the deliveries they came from, so a price rise shows in the next batch's cost.
Labor on the batch. The minutes a batch took are recorded on it, so the hours behind each product are on record.
Margins by product. Margins are reported per product on that actual cost, and a price-creep report per supplier shows whose prices moved.
| The job | Spreadsheet | In TaroStack |
|---|---|---|
| What a bag cost | One price from last season | Cost from the batch's deliveries |
| The hours behind a batch | Remembered | Labor minutes on the batch |
| An ingredient creeping up | Noticed late | A price-creep report |
| Margins by product | Re-worked by hand | Margins on real cost |
Recipes, batches, costing and margin reports are on every plan, from $49 a month. The first 30 days are free, with no credit card. If you'd like a hand setting up, ask, and we'll do it with you.