--- layout: default_v3 language: default permalink: food-cost.html i18n_link: 3589 updated: 2021-04-29 #--- article key-values ---# collection: default_topiccluster t_keyword: Food Cost tags: food cost, restaurant food cost, cost of food, high food cost, food cost budget type: pillar page_id: 3589 hreflang_id: 3589 child_id: [3613,3608,3605,3612,3614] date_published: 2021-04-29 date_modified: 2021-04-29 #--- javascript schema ---# javascript_schema: - script: jquery_3_2_0_min - script: bootstrap_min - script: article_infinite_scroll - script: article_mix_infinitescroll - script: article_mix - script: article_mix_faq - script: article_mix_toc #--- section schema ---# section_schema: - section: nav-main_menu - section: article_body_v2 - section: footer - section: schedule_demo_cta #--- page key-values ---# meta_tags: t_meta_title: What to Know About All Things Food Cost t_meta_description: Throughout the competitive food industry, keeping food cost tracked and verified becomes a critical component to success. t_meta_abstract: Throughout the competitive food industry, keeping food cost tracked and verified becomes a critical component to success. i_meta_image: article_body: json-ld_article: v_date_published: 2021-04-29 v_date_modified: 2021-04-29 author: p_author_id: 153 t_author: Cynthia Vespia p_author_url: cynthia-vespia.html i_author: 153.png t_author_description: Cynthia Vespia is a content writer/copywriter helping brands connect with their customers through top quality content. She's also a published fantasy author giving villains a purpose and heroes a hard time. p_author_facebook: //www.facebook.com/HubWorksApp p_author_twitter: https://twitter.com/HubworksApp p_author_linkedin: p_author_instagram: feature_snippet: p_type: text t_title: t_description: content: heading: t_title: What to Know About All Things Food Cost t_description: Throughout the competitive food industry, keeping food cost tracked and verified becomes a critical component to success. image: i_image: what-to-know-about-all-things-food-cost-1619654898-1437.png t_image_description: calculate food calculating food cost cost goods percentage food v_image_attribution: //pixabay.com/photos/shopping-spending-till-slip-879498/ v_image_license: Creative Commons Zero v_video: paragraphs: - t_headline: Food Cost- What is it? t_text: Food cost is the ratio of the food inventory used in the restaurants along with the revenue those ingredients generate through food sales. It's referred to as food cost percentages to better confirm the sales to cost ratios.


The percentages are used to set forth a precedence for the menu pricing. By establishing this cost it will help restaurant managers to optimize profits. Understanding food costs is invaluable when it comes to the bookkeeping of a restaurant business. p_headline_type: h2 image: i_image: t_description: v_attribution: v_license: callout_text: - t_headline: Food Cost Calculator & Food Cost Formula t_text: The food cost formula used in most restaurants is-

Food Cost = (Beginning Inventory + Purchases - Ending Inventory) / Food Sales

These are the steps to calculate food cost-

Step 1- Determine Inventory Usage
To calculate food cost the inventory usage will need to be calculated first. That means determining how much product the restaurant has during a certain period of time. The formula for the suggested usage would look like this-

Beginning Inventory + Purchases - Ending Inventory = Inventory Usage

Whatever is available on the first of the month will account for the beginning inventory. The ending inventory includes the items remaining on the last day of the month. If any other inventory has been ordered within the month that will also need to be factored in. Those items are considered the purchases.

Step 2- Find Total Sales
Sales can be found through the POS system or calculated manually by multiplying the amount of product sold during the month by its sales price.

Step 3- Use Food Cost Formula
Once the numbers from steps 1 and 2 are determined then the food cost formula is used to calculate the average cost of a dish's sale price. p_headline_type: h2 image: i_image: t_description: v_attribution: v_license: video: v_video: U2b3VRy_ugI v_video_language: default t_name: Bo Bryant "The Restaurant Giant" - Food Cost for Beginners t_description: Restaurant Food Cost is a little more dynamic than you might think. Join me as we cover a simplified way to rationalize, track, manage and account for food cost and pick up some tips and tricks along that way, sure to help you drive down your cost of goods! v_url: //youtu.be/U2b3VRy_ugI i_thumbnail: //i.ytimg.com/vi/U2b3VRy_ugI/default.jpg i_thumbnail_1x1: //i.ytimg.com/vi/U2b3VRy_ugI/default.jpg i_thumbnail_4x3: //i.ytimg.com/vi/U2b3VRy_ugI/mqdefault.jpg i_thumbnail_16x9: //i.ytimg.com/vi/U2b3VRy_ugI/sddefault.jpg v_upload_date: 6-15-2016 v_length_minutes: 46 v_length_seconds: 30 v_view_count: 92843 callout_text: - t_headline: What is Food Cost Percentage? t_text: Food cost percentage is a term the food industry uses that is simply another term for food cost. It examines the cost of goods sold against daily sales to determine if the menu items are the proper pricing for the best ROI.

How to calculate food cost percentage
In order to calculate food cost percentage, the restaurant would it is divided by the cost of goods sold and revenue earned. This is the standard formula for the restaurant business to maintain accuracy for their sales figures.

What is the best food cost percentage to have?
The food cost percentage that is best will be determine by the operation costs and cost of ingredients or other foods. The average food cost percentage most restaurants post is 28-32% but will vary. p_headline_type: h2 image: i_image: what-is-food-cost-percentage-1619654898-5994.png t_description: //pixabay.com/photos/lobster-cooked-danish-1608440/ v_attribution: //pixabay.com/photos/lobster-cooked-danish-1608440/ v_license: Creative Commons Zero callout_text: - t_headline: How to Calculate Cost of Goods Sold t_text: Calculating the cost of goods sold starts with having the information of these values-

Once those values are established, the COGS formula can be implemented.
The formula for finding the cost of goods sold is a simple method of adding the value of the beginning inventory and purchased inventory together and then subtracting the value of the ending inventory from that number. p_headline_type: h2 image: i_image: how-to-calculate-cost-of-goods-sold-1619654898-5920.png t_description: //pixabay.com/illustrations/fruit-fruits-cassette-speakers-5280218/ v_attribution: //pixabay.com/illustrations/fruit-fruits-cassette-speakers-5280218/ v_license: Creative Commons Zero callout_text: - t_title: Calculating cost of goods sold t_text: Calculating the cost of goods sold includes these values-

- t_headline: Why is Food Cost Important? t_text: Having a profitable restaurant comes from determining its food cost. If the food cost is unknown the reports won't show accurate information. Without having the right information for the food cost any increases will wind up being a guess. Any budgeting of the restaurant's future costs will fail because the food budget won't reflect the proper food cost.

When the total food cost is factored it helps to ensure menu items are priced correctly for maximum profit. Tracking food cost consistently will highlight when and where pricing can be adjusted. Knowing the specific cost percentage breakdown is necessary for this to work.

The best way to stay on top of food cost is by having an inventory schedule that is followed daily. Inventory management will provide a better outlook on the profit margins. Inventory software can make this task less daunting and reveal more accurate numbers. p_headline_type: h2 image: i_image: t_description: v_attribution: v_license: video: v_video: Mr1AA-m6BjE v_video_language: default t_name: How To Calculate Food Cost Percentage (& SAVE $$) | Cafe Restaurant Management Tips 2020 t_description: Transform Your F&B Idea Into a Profitable Food Business- //learnnow.wilsonklee.com/PROMasterclassYT Subscribe to Wilson's YouTube channel now //bit.ly/WKLyoutube//bit.ly/WKLyoutubeCheck out these popular restaurant business playlists1.) Restaurant Management Basics To Open A Successful Restaurant - //www.youtube.com/watch?v=TCHKzgZtcbU&list=PLC6rIoOO0LR5H5WGJF5uT39-9wBjsAk-U2.) Restaurant Marketing Tips To Get More Customers - //www.youtube.com/watch?v=FIuwy_gE7jo&list=PLC6rIoOO0LR7Q1gZ3gR65WSAXfJ4DJkoF3.) Restaurant Hiring Tips & Reduce Employee Turnover - //www.youtube.com/watch?v=ARG3ey_U3J0&list=PLC6rIoOO0LR41ohIXatXYVIrlICG_Fu8cManaging your food cost is the difference between you going bankrupt or thriving. Here's how you calculate food cost percentage and build a successful restaurant food business!HOW TO CALCULATE FOOD COST PERCENTAGE & SAVE $$#foodcost #restaurantmanagementFood cost is one of 3 giant expenses that take a bunch of your margins. If you don't know your food cost or how to manage it, you'll be in big trouble. It is one of the numbers you MUST understand well and tinker around. That is..if you want to open and run a successful restaurant or food and beverage business. And when restaurant margins are already so thin, you want to do as much as you can to reduce your expenses. One of them is you can control is reducing your food costs. What you need to do is understand that there are two food costs- Ideal and Actual. Ideal is the cost of goods sold (COGS) in a perfect world - where there is no food wastage or theft. Actual takes into account those mishaps - which is the reality. When you know both numbers, you can compare them and see what you can do to fix it. How close are they? If your Actual food cost percentage is way higher than your Ideal food cost percentage, that means you have a big problem in your hands. The good news is that you're atleast aware of the discrepancies and can make adjustments. Many rookie restaurant owners and restaurant management fail to know their numbers and end up driving their business to the ground. I can't emphasize enough how important it is to know your numbers. So if you're a restaurant owner, a small business owner, or part of the restaurant management team and want learn how to calculate food cost percentage, ways to reduce food costs, food costing and pricing, or simply how to run a restaurant successfully....keep watching!RESOURCES- [FREE Training] Profitable Restaurant Owner's Blueprint- //learnnow.wilsonklee.com/BlueprintYT[FREE Training] Transform Your F&B Idea Into a Popular Restaurant Masterclass- //learnnow.wilsonklee.com/PROMasterclassYT[EXCLUSIVE] Profitable Restaurant Owner's Facebook Group- //learnnow.wilsonklee.com/PRO-GroupYT[EXCLUSIVE] Virtual Kitchen Facebook Group- //learnnow.wilsonklee.com/virtual-kitchen-groupYT[PAID Training] PRO Academy- //learnnow.wilsonklee.com/PROAcademyYT[PAID Consultation]- //learnnow.wilsonklee.com/clarityYT[EQUIPMENT]- //learnnow.wilsonklee.com/toolsYT ABOUT WILSON- I'm Wilson, your new restaurant business partner. I'm here to help turn your food and beverage concept into a reality with expert tips & tricks for success. My videos are based on years spent in the industry building multi-million dollar businesses, including my own international dessert chain (//720sweets.com/) with locations spanning the globe. Since my franchise was acquired (2020) it's been my mission to share this knowledge with people like you who have great ideas, but just can't seem to break through. If I did it all with no experience, so can you. I know firsthand the struggles and mistakes most entrepreneurs make, and want to show you exactly how to avoid them. I've helped hundreds of restaurant owners and entrepreneurs create explosive Food & Beverage businesses. You don't have to take my word for it. I've been awarded Top 30 Under 30, Young Entrepreneur of the Year, Top 10 Emerging Entrepreneurs, and recently a Forbes Business Council Member. Subscribe to see what everyone's talking about and learn how you can achieve the same life-changing results. Find more great resources, check out //www.wilsonklee.com/CONNECT WITH WILSON- Instagram- //www.instagram.com/wilsonklee/Facebook- //www.facebook.com/WilsonKingLee/Collabs/Sponsorship- hello@wilsonklee.comSend items to- 18th Floor 450 SW Marine Drive, Vancouver BC V5X0C3 Canada v_url: //youtu.be/Mr1AA-m6BjE i_thumbnail: //i.ytimg.com/vi/Mr1AA-m6BjE/default.jpg i_thumbnail_1x1: //i.ytimg.com/vi/Mr1AA-m6BjE/default.jpg i_thumbnail_4x3: //i.ytimg.com/vi/Mr1AA-m6BjE/mqdefault.jpg i_thumbnail_16x9: //i.ytimg.com/vi/Mr1AA-m6BjE/sddefault.jpg v_upload_date: 11-28-2019 v_length_minutes: 14 v_length_seconds: 39 v_view_count: 54448 callout_text: - t_title: Calculating Food Costs t_text: Three important aspects of calculating food costs-

1. Menu Pricing
Menu prices determine how to stay profitable in the restaurant business.

2. Ingredients
Cost of ingredients and portion sizes will need to be considered as they can mark up the cost of the menu item.

3. Tracking
Successful inventory management tracks the menu items and food costs effect on sales.
- t_headline: Ideal Food Cost vs. Actual Food Cost t_text: Actual food cost is a very basic, yet very important calculation. When food cost is calculated it is usually the actual food cost which is being sought. The formula relies on the inventory count and looks like this-

Actual Cost of Goods Sold = (Beginning Inventory + New Inventory Purchased) Ending Inventory

For the figures to be accurate, inventory counts should be done at the same time in the morning or end of day.

Calculating Ideal Food Cost
Ideal Food Cost is a theoretic idea of what the food cost should come in at. A very accurate account of ingredients per menu item will factor into this equation. It would include all food products used for the dish and also any paper costs like containers or napkins used. The formula would present as this-

Ideal Cost of Goods Sold = (Item A Food Cost x Units of A sold) + (Item B Food Cost x Units of B sold) + (and so on)

Because menus have more than one item, and the menu item uses more than one ingredient, doing this calculation manually each week can be time consuming and may not be accurate.

A point-of-sale (POS) system tied directly to the inventory can streamline this process. It can generate detailed reports in half the time a human hand would. doing it manually. p_headline_type: h2 image: i_image: ideal-food-cost-vs-actual-food-cost-1619654899-8199.png t_description: //pixabay.com/photos/steaks-meat-bbq-summer-food-meals-2588765/ v_attribution: //pixabay.com/photos/steaks-meat-bbq-summer-food-meals-2588765/ v_license: Creative Commons Zero callout_text: - t_headline: Ways for Technology to Improve Food Costs t_text: Technology has proved to streamline the effectiveness restaurant duties such as tracking food costs. Many restaurant managers are now relying on some form of restaurant technology to make their jobs a little easier.

The results of this have allowed more information based decisions that increase profit, optimize processes and save time. Here are a few of the ways incorporating technology into the restaurant business will help save on food costs-

1. Analyze menu mix
Cloud-based, back-office software has become the norm for most restaurants and food businesses. It provides a full system that integrates sales and cost information in real-time. Sale performance from different locations can be compared regardless of which POS is being used. This lets restaurant managers take action faster.

2. Optimize supply chain
The food supply chain is paramount to the success of producers, distributors and retailers of food. Mobile apps make this process easier with a strong analysis of the inventory on hand and a digital record to back it up. The apps integrate with any back office software and automatically puts in a purchase order when inventory falls low.


3. Cut waste and manage margins
Having proper refrigeration can mean the difference between food spoiling and going to waste or not. Regular temperature checks can be done easily using a Bluetooth connected thermometer. If the refrigeration unit is off by a few degrees an alert will be sent out to the staff so adjustments can be made before food spoils.

Any of these technological advancements can help spot a problem before it grows and negatively impacts the bottom line. They can also reduce food costs without sacrificing any quality standards. p_headline_type: h2 image: i_image: ways-for-technology-to-improve-food-costs-1619654899-5231.png t_description: //pixabay.com/photos/fish-stall-market-food-fresh-ice-4565609/ v_attribution: //pixabay.com/photos/fish-stall-market-food-fresh-ice-4565609/ v_license: Creative Commons Zero callout_text: - t_headline: Conclusion to Food Cost t_text: p_headline_type: h2 image: i_image: t_description: v_attribution: v_license: callout_text: event_body: json-ld_event: t_name: Employee Scheduling for Restaurant Managers t_description: Attendees will learn how create excellent schedules. The class teaches managers how to estimate the number of employees they need to staff their locations; how to accurately forecast their customer demand; how to quickly and accuaratly write and communicate schedules to employees; and how to evaluate the accuracy and optimization of their schedules to make adjustments. v_start_date: 2022-08-08 i_image: p_location_name: Altametrics Online Webinar Course p_address: webinar.hubworks.com?site=altametrics v_price: 10.00 t_offer_description: Priority Registration v_registration_url: webinar.hubworks.com?site=altametrics ---