How To Calculate Food Costs

Written by Jake Freedlund, Account Manager

As a restaurant owner or operator, it's essential to keep track of your food costs in order to maintain profitability. By calculating your food cost percentage, you can better understand your expenses and make informed decisions about menu pricing, inventory management, and other aspects of your business.

In this post, we'll outline the steps for calculating your food cost percentage and provide some tips for controlling your food costs over time.

Introduction to Food Cost

What is Food Cost and Why is it Important?

Your food cost is the percentage of your total sales that is spent on food and beverage supplies. It's important to accurately calculate your food cost because it can impact your profits and overall financial success. By understanding your food cost, you can make informed decisions about pricing, menu planning, and inventory management.

How to Calculate Food Cost Percentage

To calculate your food cost percentage, you'll need to know the cost of each of your menu items. This includes the cost of ingredients, as well as any labor or overhead costs associated with preparing the dish. You'll also need to track your food supplies and inventory management to ensure you have accurate costs.

Once you have this information, you can use the following food cost percentage formula:

Food Cost Percentage = (Total Food Costs / Total Food Sales) x 100

This will give you a percentage that represents your food cost as a percentage of your total sales. For example, if your total food costs are \$10,000 and your total food sales are \$20,000, your food cost percentage would be 50%.

Tracking Cost of Goods Sold (COGS)

In addition to calculating your food cost percentage, it's also important to track your cost of goods sold (COGS). This is the total cost of the food and beverages you sell, including both the cost of ingredients and any associated labor or overhead costs. By tracking your COGS, you can better understand your total cost and make informed decisions about pricing and menu planning.

Ideally, you want your food cost percentage to be as low as possible. However, it's important to balance this with the need to provide high-quality, appealing menu items. By using menu engineering techniques, you can optimize your menu to maximize profits while still offering a variety of dishes that your customers will enjoy.

Conclusion

Effective food cost control is critical to the bottom line of any restaurant. By accurately calculating your food cost and tracking your COGS, you can optimize your menu and pricing to increase profits and ensure the long-term success of your business.

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From concept developer and restaurant general manager, to corporate chef and marketing director, Murphy has been the lead executive in a number of the country’s most prominent restaurants and bars.Connect with Geordy on geo@cypresshospitalitygroup.com

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