How To Calculate Food Cost For Restaurants To Optimize Margin Percentages

There are several key steps to calculate food cost for restaurants to optimize percentages. Food cost percentage is the total money used to buy food divided by the total amount of revenue your restaurant generates. It’s an important metric to determine an establishment’s efficiency for ingredient sourcing and overall profitability. As a restaurant owner, you should know how calculate your food cost and optimize it according to your menu. This way, you can increase your wealth strategically and drive a big boost in profits. Read on to learn to calculate food cost for restaurants to optimize percentage.

Evaluate Your Current Financials

To begin, evaluate your current expenditure to optimize your food cost percentage. Food cost is often the second largest cost behind rent for restaurants. A small savings in your food cost can translate into a huge boost in profit. Gather your expenses and create a goal for your food cost total that is reasonably achievable. Later, this will help you evaluate how well you have optimized your percentage for your business. Surely, evaluate your current expenditure to optimize your restaurant’s food cost.

Determine Raw Food Cost

Next, determine your raw food cost total to calculate and optimize your percentage. Determine the cost of a standard quantity of each ingredient you purchase. Create an itemized recipe for each plate you serve and calculate the total cost per plate. For example, if you use \$1of pasta per dish, 2\$ in cream and 2\$ in tomato sauce, the total cost would be \$5 for the plate. Create a comprehensive list of all the recipes and their correlating prices. Surely, determine your raw food cost total to optimize your percentage.

Use The Food Cost Formula

Further, use the food cost formula to determine your total food cost percentage. You can use cost containment strategy or use the cost of goods sold as the first part of the formula. Divide your cost of goods sold by the total revenue generated in the day. This should result in a number less than 1 which is your food cost percentage. For example, a restaurant that made \$100 on \$20 worth of raw ingredients has a food cost percentage of 20%. In short, take your cost of goods sold divided by total sales to determine your food cost formula.

Create Solid Inventory Practices

Then, create solid inventory practices to optimize your food cost percentage. To determine your total cost of goods sold, add your beginning inventory to your purchased inventory. Then, subtract your ending inventory to see the total amount of goods that were used that day. A variable in the food cost percentage is the amount of food waste you generate. Better inventory practices will lead to more salvageable goods leftover at the end of the day. This should result in a higher value of goods sold when calculating your total cost. Definitely, create solid inventory practices to maximize the value of your ingredients.

Determine Menu Item Prices

To continue, set prices on your menu and shop around to optimize your food cost percentage. Having a costing system guide will help when determining menu item prices. To determine a minimum price for your menu items, take the cost per serving of a dish and divide it by the ideal food cost percentage goal calculated. For example, each burger costs \$2 to make. Divide \$2 by your desired food cost percentage. 2/.2 is 10. Price the burger no lower than \$10. To decrease your food cost percentage from 25% to 20%, you can adjust the price accordingly. As you optimize your menu, prep time and other factors may continue to change. Continue to evaluate your total food cost to keep your menu optimally priced. All in all, continue optimizing your food cost percentage by adjusting your menu.

There are several steps to calculate food cost for restaurants and optimize percentage. First, evaluate your current financials to inform your calculations process. Then, determine raw food cost to further optimize. To continue, create solid inventory practices to ensure minimal amount of food cost is lost to waste. Next, use the food cost percentage formula to calculate your total. Then, use the food cost percentage to calculate a minimum menu price to reach your goals. Follow the above steps to calculate food cost percentages for restaurant optimization.

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