How to Calculate your Restaurant’s Food Cost Percentage

It is pretty self-explanatory that every restaurant owner needs to determine the food cost and make suitable changes in the menu pricing. Besides, the reason why all restaurants must find out the food cost is that if you decide otherwise, you can get short of money, and this will enhance your total restaurant expenses as well. However, it won’t be a child’s play to calculate the food cost of your eatery as" Restaurateurs "aren’t aware of the precise food cost formula in most of the cases. Keep in mind, inaccurate food cost calculation can lead to a disaster in the making and that is why a need is always felt to find the best way possible to figure this out.

What is Food Cost Calculation?

Prior to jumping into the details, we need to understand what food cost calculation really means.

While being expressed in percentage, food cost is the exact ratio of the cost of ingredients and the total revenue that those ingredients produce after being sold in the form of dishes.

When you calculate the price of your restaurant’s food, you need to know the cost incurred in its making. Besides, you also have to figure out how much it costs for your eatery to make one serving each offer on your menu.

Total Food Cost Percentage Formula

To determine the total cost percentage, first, you need to determine as to what portion of your eatery’s revenue is consumed by food costs? Here is the formula to find the total food cost percentage:

Total Food Cost Percentage = (Total Cost of Goods Sold / Total Revenue) x 100

Let’s have a look at the way this formula is implemented:

1. Calculate the Total Cost of Goods Sold (COGS) in the First Place

You need to calculate the Total Cost of Goods Sold (COGS) as it will tell you about the amount of food cost your eatery that you’ve sold over a specific period of time. You can easily calculate CGS through the following formula.

Cost of Goods Sold (COGS) = [(Opening Food Inventory) + (Inventory Purchase Value)] – (Closing Inventory Value)

Example:

Let’s say your total inventory is worth £9,000 at the start of March and you spend an extra £3,000 on food supplies during March. By the end of the month, the final inventory is £6,000. Your CGS would be;

CGS = [(£9,000) + (£3,000)] – £6,000 = £12,000 – £6,000 = £6,000

2. Calculate your Total Revenue

Secondly, you need to calculate the total revenue for the time period. A point of sale system can be of great help to find your restaurant’s revenue during a week, month or year.

While continuing the above example, we suppose that the total revenue at the end of March after checking JeM Restaurant EPOS System comes out to be £24,000.

3. Divide Cost of Goods Sold by Total Revenue and Express it in Percentage

From the above example, it can be observed that the total Cost of Goods Sold of your Restaurant for March was $6,000 and Total Revenue during the month was $24,000. To find your Total Food Cost Percentage, multiply your answer by 100.

Example: £6,000/£24,000 = 0.25

.25 x 100 = 25%.

Hence the Total Food Cost Percentage is 25 percent.

Calculating Food Cost Percentage Per Serving

To figure out the profitability of a particular item on your menu, you should use the following formula:

Food Cost Percentage per Serving = (Total Cost per Serving / Price of Serving to Customer) x 100

Find out the total price of the ingredients used in the dish and add them up to find one serving cost you make.

Find the price of the dish to customer i.e. selling price.

Divide the total cost of dish per serving by selling the price of the dish to a customer.

Example:

Let’s say the total cost for one of your restaurant’s offerings is £4.01 per serving and you charge £6.00 for that. Therefore, your price of the dish to a customer is £6.00.

Divide the total cost of dish per serving by the selling price of a dish to a customer and multiply it by 100 to find your Food Cost Percentage per Serving.

• 3.01 / £6.00 = 0.66

0.66 x 100 = 66%

Hence, the Food Cost Percentage per Serving is 66 percent.

The best thing about the accurate calculation of food cost percentage is that it enables you to make crucial decisions about menu pricing and thus influence your bottom line in a positive manner.

Being a hospitality and retail point of sale solution provider, we believe in doing the best while covering a wide range of businesses. If you are interested in knowing more about us, visit our website JeMPOS.