In order to determine the price of a mixed drink on your own, you’ll need to measure the cost of each ingredient. Learning how to calculate food cost percentage will do wonders for your bottom line. Here’s how it works. 2. Calculating food cost percentage can be a bit challenging, but by using the formulas and resources above, you'll be on your way to successfully calculating and optimizing food cost percentage for your restaurant. 52% of restaurant professionals named high operating and food costs as a top challenge. Check out the example below to see this ideal food cost percentage formula in action: In the examples shared above, ideal food cost percentage comes out to 25% and actual food cost percentage comes out to 30%. When the actual cost percentage is lowered to 25%, then gross profit increases to 75%. She figures that her total inventory was worth $10,000 at the beginning of December and she spent an additional $4,000 on food and beverage supplies in December. With so many other operational expenses for restaurants – like labor, rent, utilities, and marketing – food cost takes up a large chunk of that cash! Example: Sandra’s Total CoGS for December was $8,000 and her restaurant’s Total Revenue during that period was $26,000. With this knowledge, you’ll be able to optimize profits that impact your bottom line. Taking the extra step to calculate food cost percentage and cost of goods sold down to the individual cookie, slice of bread, or burger helps your restaurant in the long run. You’ll also want to consider labor costs, rent, overhead costs, and more when pricing your menu. Calculate your Total Cost of Goods Sold (CoGS). When you know how much a menu item costs your restaurant you to make, you can optimize menu prices to boost your profit margins. In an ideal world, there would be no food waste or theft in your restaurant. Food items and produce that are in season will be cheaper, and seasonal items that are trending with customers will help with popularity and profitability. Then note which items (including beverages) fall above and below the industry benchmarks. First, take stock of how much your current inventory costs. If an establishment’s actual beverage cost percentage is currently at 30%, then gross profit would be 70%. Keep an eye on portion sizes. Here’s a step-by-step look at how to implement this formula: 1. Do you know how much your restaurant spends on food? 1. In this post, we’ll share our food cost percentage formula, show you how to calculate food cost percentage, and help you understand why it all matters. You can consider: If these options don’t work for you, consider redesigning the layout of your menu. Divide Total Cost of Dish Per Serving by Price of Dish to Customer. Perhaps you excelled at math (which we’re equating to a low food cost percentage for your restaurant’s chicken piccata) but weren’t so great at history (a high food cost percentage for your lamb roast). Example: The chocolate mousse costs $3.01 to make and sells for $6.00. Keeping an eye on farming trends and even international trade negotiations – the 2018/2019 US-China trade war has had a huge impact on American farmers – is an important part of understanding and managing inventory costs. By pricing each menu item based on food cost percentage and cost of goods sold, you can ensure that each menu item fits within your food cost margins. To calculate your pour cost percentage, simply divide the cost of the alcohol you used in a period by your alcohol sales over the same period. The most successful franchises and restaurant chains also understand the value behind keeping a close eye on food cost. Calculate your Total Revenue for the time period you’re interested in examining. Subscribe now. Are many of your dishes coming back half-eaten? Now, let’s dig deeper into the numbers to calculate food cost percentage per dish. Should Sandra keep it on her menu? Yes, I'd like a demo of Toast is required, The 12-Step Solution to Your Restaurant Sales Slump, Food Cost Percentage = (15,000 + 4,000 – 16,000) ÷ 10,000, Food Cost Per Dish = Food Cost of Ingredients x Weekly Amount Sold, Total Sales Per Dish = Sales Price x Weekly Amount Sold, Ideal Food Cost Percentage = 2,500 ÷ 10,000. Johnny of Johnny’s Burger Bar wants to determine his famous Johnny Burger’s cost per serving. Make sure you’ve counted each item correctly, entered the right unit, and accounted for each purchasing invoice. In short, food cost percentage is important because keeping a close eye on and optimizing food cost percentage can help you achieve maximum profit. Read our post on Bar Inventory for more information about liquor cost and other important bar inventory formulas. WISK is an end to end beverage solution for bar managers, food & beverage directors, COOs, and more. You can adjust the percentage to what works best for your establishment. Track inventory seamlessly with the help of this customizable par inventory template. How much do you charge for this dish? Food cost percentage indicates what proportion of your revenue is spent on buying food and beverage supplies for your restaurant. Be smart about your menu pricing. With WISK, you’ll be able to not only effectively price your beverages, but give yourself time to focus on what matters most – your customers.

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