--- layout: default_v3 language: default permalink: perpetual-inventory/cost-of-goods-sold-restaurant.html i18n_link: 2662 updated: 2020-12-31 #--- article key-values ---# collection: default_topiccluster t_keyword: Cost Of Goods Sold Restaurant tags: Inventory Ordering Software, Cost Of Goods Sold Restaurant type: supporting page_id: 2662 hreflang_id: 2662 parent_id: 2651 date_published: 2020-12-31 date_modified: 2020-12-31 #--- 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: How to Calculate the Cost of Goods Sold In a Restaurant t_meta_description: Restaurants that understand the cost of goods sold can better manage, regulate, and source their inventory to increase turnover and reduce food waste. t_meta_abstract: Restaurants that understand the cost of goods sold can better manage, regulate, and source their inventory to increase turnover and reduce food waste. i_meta_image: article_body: json-ld_article: v_date_published: 2020-12-31 v_date_modified: 2020-12-31 author: p_author_id: 113 t_author: Chloe Henderson p_author_url: chloe-henderson.html i_author: 113.jpg t_author_description: Chloe received a bachelor's degree in journalism and mass communication from Ashford University and is currently a digital content creator for Hubworks. In her free time, she enjoys acting, writing, and spending time with family. 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: How to Calculate the Cost of Goods Sold In a Restaurant t_description: Restaurants that understand the cost of goods sold can better manage, regulate, and source their inventory to increase turnover and reduce food waste. image: i_image: how-to-calculate-the-cost-of-goods-sold-in-a-restaurant-1609281859-5649.png t_image_description: inventory purchases ending inventory v_image_attribution: //pixabay.com/photos/food-salmon-teriyaki-fish-eat-712665/ v_image_license: Creative Commons Zero v_video: paragraphs: - t_headline: t_text: Restaurants tend to shift their focus to the initial obligations, such as purchasing ingredients, instead of considering how the cost of goods sold impacts their net profit. Businesses need to appropriately price their menu to supplement more than just the cost of inventory to produce enough income for other services.

By understanding how to calculate the cost of goods sold, restaurants can determine their profits to improve inventory management and ordering strategies. p_headline_type: h2 image: i_image: t_description: v_attribution: v_license: callout_text: - t_headline: What is the Cost of Goods Sold? t_text: The cost of goods sold (COGS) is the direct production costs necessary to manufacture the goods sold.

In the restaurant industry, COGS includes the cost of all ingredients used to make a menu item. This includes not only the ingredients to make the dish but also the condiments, beverages, and garnishes.

However, restaurants usually calculate the COGS per reporting period rather than per dish. Therefore, at the end of the accounting cycle, managers must total all of the materials used to produce the sales for that month or quarter.

Typically, COGS occupies one-third of the average restaurant's gross revenue and is subtracted, along with other overhead expenses, to determine the net profit.

Restaurants can expect their COGS to fluctuate alongside customer demand on a weekly, monthly, and seasonal basis. It will also change whenever the cost of produce and other ingredients fluctuate. Management must continuously cross-examine their COGS and menu prices to ensure they can still generate profit when supplier costs increase. p_headline_type: h2 image: i_image: what-is-the-cost-of-goods-sold-1609305304-3052.png t_description: //pixabay.com/photos/vegetables-healthy-eating-cooking-1584999/ v_attribution: //pixabay.com/photos/vegetables-healthy-eating-cooking-1584999/ v_license: Creative Commons Zero callout_text: - t_headline: How to Calculate the Cost of Goods Sold t_text: In order to calculate the COGS, restaurants need to quantify three values for the given timeframe-




Once these values are configured, restaurants can calculate their COGS-

(Beginning Inventory + Purchased Inventory) Ending Inventory = COGS

For example, a restaurant begins their reporting period with $4,000 worth of inventory left over from the previous cycle. Throughout the timeframe, management purchased $6,000 worth of additional inventory. By the end of the period, the business had only $2,000 left of stock, making the COGS $8,000-

($4,000 + $6,000) - $2,000 = $8,000


This means that the establishment spent $8,000 on the food and beverages sold during this particular timeframe. p_headline_type: h2 image: i_image: how-to-calculate-the-cost-of-goods-sold-1609305304-3428.png t_description: //pixabay.com/photos/money-bills-calculator-save-256312/ v_attribution: //pixabay.com/photos/money-bills-calculator-save-256312/ v_license: Creative Commons Zero callout_text: - t_headline: How to Lower the Cost of Goods Sold t_text: While the COGS is generally around 30%, there are several ways restaurants can reduce their expenses, including- p_headline_type: h2 image: i_image: how-to-lower-the-cost-of-goods-sold-1609305304-6316.png t_description: //pixabay.com/photos/financial-analytics-blur-business-2860753/ v_attribution: //pixabay.com/photos/financial-analytics-blur-business-2860753/ v_license: Creative Commons Zero callout_text: - t_headline: Buying in Bulk t_text: Many suppliers offer lower rates to businesses that buy products in bulk, as it reduces their packaging and shipping costs. Therefore, restaurants should consider increasing their purchase orders for non-perishable goods and products that have a long shelf life, such as-


While restaurants can also buy perishable goods in bulk, there is a concern for food spoilage and waste. Even frozen foods face the risk of going bad from freezer burn.

Establishments must also consider the storage needs for housing large volumes of product. Depending on the type of inventory, items may need to be stored separately to avoid cross-contamination. Therefore, restaurants need ample space in their-

p_headline_type: h3 image: i_image: t_description: v_attribution: v_license: callout_text: - t_headline: Finding Cost-Efficient Products t_text: While this option may seem obvious, many restaurants will only source cheaper ingredients as a final attempt to lower COGS, as it can significantly impact the quality of goods. If customers notice that meals lack quality but still remain at the same price point, restaurants may lose their integrity and good reputation. It can also decrease customer satisfaction, retention, and advocacy.

One way to safely source cost-efficient ingredients is to price shop by comparing several suppliers. Some vendors are open to negotiating contracts and prices to guarantee steady business. p_headline_type: h3 image: i_image: finding-cost-efficient-products-1609305304-4003.png t_description: //pixabay.com/photos/spice-chiles-paprika-chili-powder-370114/ v_attribution: //pixabay.com/photos/spice-chiles-paprika-chili-powder-370114/ v_license: Creative Commons Zero callout_text: - t_headline: Monitoring Inventory t_text: Without adequate inventory management, restaurants can experience increased expenses from food waste. Therefore, businesses should implement standardized guidelines and procedures to regulate stock, from portioning to ordering strategies.

By utilizing inventory ordering software, restaurants can maintain healthy stock levels by establishing accurate reorder points. Optimized reorder points can boost sales and minimize the threat of food spoilage from overstocking. p_headline_type: h3 image: i_image: t_description: v_attribution: v_license: callout_text: - t_headline: Utilizing Seasonal Menus t_text: By keeping space on the menu for seasonal dishes and specials, restaurants can quickly use ingredients that are about to expire. This enables businesses to increase inventory turnover rate to clear shelves of excess products and improve ordering strategies.

However, if customers enjoy a particular seasonal dish and restaurants experience increased demand, they should consider making it a recurring item rather than just a way to use excess ingredients. p_headline_type: h3 image: i_image: utilizing-seasonal-menus-1609305304-3402.png t_description: //pixabay.com/photos/blackboard-chalk-board-cafe-daily-677578/ v_attribution: //pixabay.com/photos/blackboard-chalk-board-cafe-daily-677578/ v_license: Creative Commons Zero callout_text: - t_headline: Reducing Food Waste t_text: Aside from utilizing seasonal menus, restaurants should discover creative ways to reduce their food waste.


For example, chefs can use stale bread to make breadcrumbs or croutons and vegetable scraps to make stock. This not only minimizes spoilage but saves restaurants the cost of purchasing these items as well. p_headline_type: h3 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.altametrics.com?site=altametrics v_price: 10.00 t_offer_description: Priority Registration v_registration_url: webinar.altametrics.com?site=altametrics ---