--- layout: default_v3 language: default permalink: food-cost/average-restaurant-food-cost.html i18n_link: 3614 updated: 2021-05-10 #--- article key-values ---# collection: default_topiccluster t_keyword: Average Restaurant Food Cost tags: restaurant food cost, food cost, business management, restaurant management, food safety, zip haccp type: supporting page_id: 3614 hreflang_id: 3614 parent_id: 3589 date_published: 2021-05-10 date_modified: 2021-05-10 #--- 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: Average Restaurant Food Cost t_meta_description: Understanding how to manage the average restaurant food cost is imperative to running a successful food operation. t_meta_abstract: Understanding how to manage the average restaurant food cost is imperative to running a successful food operation. i_meta_image: article_body: json-ld_article: v_date_published: 2021-05-10 v_date_modified: 2021-05-10 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: Average Restaurant Food Cost t_description: Understanding how to manage the average restaurant food cost is imperative to running a successful food operation. image: i_image: average-restaurant-food-cost-1620079044-6572.png t_image_description: purchases ending inventory formula food sales food percentage food v_image_attribution: //pixabay.com/illustrations/finance-business-calculator-2751890/ v_image_license: Creative Commons Zero v_video: paragraphs: - t_headline: The Average Restaurant Cost of Food, Liquor and Labor Cost t_text: Of the many costs that go into restaurant management, keeping food cost low is the cornerstone to success. Cost of liquor and labor are also important factors in keeping food sales profits high in the restaurant business.

Prime Costs

Prime cost is an indicator of how to price menu items to maintain profitability. Also referred to as Cost of Goods Sold or COGS, it is the sum of food, beverage and labor costs combined.

Along with the inventory purchases from food and beverage, prime costs also include labor costs, payroll taxes, medical insurance, and employee benefits.

Average Liquor Costs

Liquor profits can be high earners if the costs are kept low. Every food service business that sells alcohol will have different costs to factor when tallying their liquor costs. Usually, the liquor costs are based on gross margin and direct costs.

An average total cost falls between 18% to 24%. Different types of drinks will command their own cost percentage as well. For example, liquors are 15%, beer runs between 20% to 25% depending on whether it's draft or bottled. Fine wine can is anywhere between 30-40%.

Average Food Costs

Because the profit margins leave little room for error, calculating food costs is a big challenge in restaurant management. Monitoring food cost percentage closely provides a solid indicator of when to make changes.

Inventory purchases, food distributors, and menu prices can all be adjust to increase profits. Average restaurant food costs need to stay between 28% to 35% to maintain profitability.

Average Labor Costs

Labor costs include more than just calculating the wages of employees. While this is true, the labor costs also include-


Establishments in food service have different gross revenue when it comes to labor costs. The aim is between a 20-30% cost percentage.

Depending on the demand needed the staffing costs could affect labor costs. A fast-food restaurant could have 25% in labor cost while full-service would be a larger cost percentage of 30-40% of revenue. It all depends on the scale of the bar or restaurant. p_headline_type: h2 image: i_image: the-average-restaurant-cost-of-food-liquor-and-labor-cost-1620079713-6422.png t_description: //pixabay.com/photos/food-vegetable-tomato-costs-5353311/ v_attribution: //pixabay.com/photos/food-vegetable-tomato-costs-5353311/ v_license: Creative Commons Zero callout_text: - t_title: The Big Three Costs t_text: Easy costs to control inside a restaurant are often referred to as "The Big Three." They include-

- t_headline: How to Calculate Your Average Restaurant Food Costs t_text: Food cost percentage is broken down into sections with their own cost formula.

How to Calculate Your Liquor Costs

Liquor costs are calculated by dividing their total sales from the Cost of Goods Sold. The formula would look like this-

COGS/Liquor Sales = Liquor Costs

Say the bar made $15,000 of the liquor inventory for the year and the net sales were $65,000. The cost percentage for liquor would be 23%.

Example- (15,000/65,000) = .23 x 100 = 23%

For every dollar earned through sales in sales 23 cents of it pays for the liquor. The remaining 77 cents is the revenue or gross margin.

How to Calculate Food Costs
Cost of Goods Sold (COGS) is the amount spent on ingredients that make up menu items. This includes each menu item served during a specific time period.

To calculate Cost of Goods Sold (COGS) the formula is-

Beginning Inventory (inventory available at the start of a certain time period)+ Purchases (inventory purchases made within the same time period) - Ending Inventory (purchases ending the time period) = COGS

Prime Costs should also be calculated as a percentage of sales. To do that total sales would be divided from the prime cost. Ideally 55-65% should be prime costs while the remainder would go into additional expenses such as rent, new equipment, utilities and menu engineering.

How to Calculate Ideal Food Costs

Having an ideal food cost highlights any inconsistencies between the food cost percentage total and the actual food cost.

The difference from actual food costs is that ideal food costs don't include beginning inventory purchases or ending inventory. The ideal food cost percentage formula-

Total Cost Per Dish / Total Sales Per Dish

When this formula is used it can show where higher costs lie, for instance over ordering supplies or food waste. Once the percentage difference is found it can be adjusted.

How to Calculate Labor Costs

In order to determine what your restaurant is running at for labor costs you will need to calculate labor costs as a percentage. The first thing you will want to do is add up the cost from the different cost groups.

How to Calculate Labor Costs as a Percentage

Labor costs are figured by first calculating them as a percentage of total sales. The POS system will have a report showing the total revenue data. From there the total labor costs will be calculated by adding the data on the report. That sum will be divided by revenue to get the exact labor cost.

Tracking all food, beverage and labor cost percentages consistently will make sure profits don't wane. If any variances show up in the calculations they can be adjusted to control costs and continue in a direction towards the goals of the restaurant. p_headline_type: h2 image: i_image: how-to-calculate-your-average-restaurant-food-costs-1620079713-1428.png t_description: //pixabay.com/photos/apple-fruit-costs-vitamins-harvest-4818841/ v_attribution: //pixabay.com/photos/apple-fruit-costs-vitamins-harvest-4818841/ v_license: Creative Commons Zero callout_text: - t_headline: Conclusion to Restaurant Food Costs t_text: p_headline_type: h2 image: i_image: t_description: v_attribution: v_license: video: v_video: QpYX4GfSiHA v_video_language: default t_name: Food Costs Formula- How to Calculate Restaurant Food Cost Percentage t_description: What is the food cost formula and how can you use it to calculate your restaurants food cost percentage. I will explain everything you need to know about food costing in this video.As a restaurant owner, manager, operator or chef, you have to know how to calculate your food cost so you can lower expenses and increase your profits.DOWNLOAD THE FOOD COST GUIDE-//therestaurantboss.com/restaurant-food-cost-target/LEARN MORE ABOUT BACON-//ClickBacon.com MORE FREE RESTAURANT TRAINING TIPS-//RestaurantProfitandPerformance.com SUBSCRIBE-//www.youtube.com/subscription_center?add_user=gromfinboss At The Restaurant Boss, I post weekly training tips for restaurants and bar's. Tips range from food and labor cost, to restaurant specific marketing and management. I welcome you to check it out and sign up for my FREE video training series. LET'S CONNECT!Facebook - //facebook.com/TheRestaurantBossTwitter - //twitter.com/RyanGromfinInstagram - //instagram.com/ryangromfin MORE GREAT VIDEOS//www.youtube.com/user/gromfinboss Please be sure to like this video and leave your comments or questions below as well as share this video with your friends, co-workers and other restaurant owners, managers and operators. I promise to respond to every comment or question! Thank you, Ryan GromfinThe Restaurant Boss//TheRestaurantBoss.com v_url: //youtu.be/QpYX4GfSiHA i_thumbnail: //i.ytimg.com/vi/QpYX4GfSiHA/default.jpg i_thumbnail_1x1: //i.ytimg.com/vi/QpYX4GfSiHA/default.jpg i_thumbnail_4x3: //i.ytimg.com/vi/QpYX4GfSiHA/mqdefault.jpg i_thumbnail_16x9: //i.ytimg.com/vi/QpYX4GfSiHA/sddefault.jpg v_upload_date: 1-29-2014 v_length_minutes: 8 v_length_seconds: 49 v_view_count: 866849 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 ---