The formula
Food cost percentage tells you how much of every dollar of food sales goes to the ingredients behind it. You need two numbers: what the food you used cost, and what the food sold for.
Food cost percentage
Cost of food used = opening inventory + purchases − closing inventory
Food cost % = cost of food used ÷ food sales × 100
A worked example
Take a month. You counted $12,000 of food on the shelves at the start, bought $34,000 during the month and counted $11,000 at the end. Food sales for the month were $120,000.
The sum
Cost of food used = $12,000 + $34,000 − $11,000 = $35,000
Food cost % = $35,000 ÷ $120,000 × 100 = 29.2%
What is a good food cost percentage?
There is no single right number. It depends on the concept, the menu mix, and the price point, and a steakhouse, a pizzeria, and a cocktail bar will each land in a different place. Many operators aim for somewhere around 28% to 35%.
A better target than a benchmark is your own menu's theoretical food cost: what the food would cost if every portion were made to spec and nothing were wasted. Your actual number is then judged against what it should have been.
Actual versus theoretical food cost
Actual food cost comes from the formula above, from what you bought and counted. Theoretical food cost comes from your recipes and what you sold. The gap between the two is the part of your food spend that did not earn revenue.
A gap that keeps opening usually has one of a handful of causes:
- Waste that was never logged: spoilage, over-production, and prep trim
- Portions served larger than the recipe
- Comps and remakes that were not recorded
- Deliveries that did not match the invoice
- Vendor prices that moved after the menu was priced
- Theft
Why month end is too late
A food cost that is calculated once a month tells you what already happened. By the time the count is done and the number is in, a price rise that started in week one has been in every plate for four weeks.
The fix is to compute it more often from live data: deduct ingredients from stock as dishes sell, log waste as it happens, and cost every recipe from your latest invoice prices. Then the number is a daily one, and a drift shows up while there is still time to act on it.
How to bring it down
Most reductions come from a short list of habits, applied consistently:
- Cost every recipe at current invoice prices, and re-cost when a price moves
- Re-price menu items when their ingredients move
- Log waste where it happens, with a reason
- Check each delivery against its invoice
- Serve to a standard portion
- Promote the dishes with the best margin