The food cost formula
Start with what you had, add what you bought, subtract what is left. That is what you used, your cost of goods sold. Divide it by the food sales for the same period.
Food cost % = (Beginning inventory + Purchases − Ending inventory) ÷ Food sales × 100
A worked example
A restaurant counts its food inventory at the start and end of the week:
| Beginning inventory | $8,400 |
|---|---|
| Purchases during the week | $11,200 |
| Ending inventory | $7,900 |
| Cost of food used | $11,700 |
| Food sales | $36,500 |
| Food cost percentage | 32.1% |
$8,400 + $11,200 − $7,900 = $11,700, and $11,700 ÷ $36,500 = 0.321. Using purchases alone would have shown 30.7%.
Keep food and beverage separate
Beverages often run at different cost percentages from food, and beer, wine and spirits differ from one another. Count them separately and divide each by its own sales; a combined number hides problems on both sides.
Plate cost: the food cost of one dish
To price a menu you need the cost of each dish, not just the kitchen as a whole. Add up the cost of every ingredient in the recipe at the portion you serve, then divide by the menu price.
Dish food cost % = Plate cost ÷ Menu price × 100
| Chicken, 7 oz at $0.28 an ounce | $1.96 |
|---|---|
| Potatoes, vegetables and sauce | $1.49 |
| Garnish, oil and seasoning | $0.40 |
| Plate cost | $3.85 |
| Menu price | $16.00 |
| Dish food cost | 24.1% |
Recost plates when supplier prices change. A 20% rise in the price of chicken alone moves this plate to 26.5%.
Ideal versus actual food cost
Ideal food cost, sometimes called theoretical food cost, is what your food should have cost given what you sold: each dish’s plate cost times the number sold. Actual food cost comes from the inventory formula above.
The difference is food you bought but never sold: waste, over-portioning, spoilage, theft, and comps or staff meals that were never recorded. A gap of a point or two is common. A wider gap is worth chasing item by item.
How to bring food cost down
- Count inventory the same way, at the same time, every period.
- Cost every recipe and recost when invoices change.
- Portion with scales, scoops and ladles, and train to the recipe card.
- Record waste and staff meals, so they stop hiding in the gap.
- Require a reason for every comp and void, and review them.
- Engineer the menu: promote dishes with strong margins, rethink the ones that sell well but cost too much.