Did you know on average restaurants spend between 20-40% of their revenue on food? However, there are so many other operational expenses for restaurants like rent, labor, utilities, and marketing. Undoubtedly people visit restaurants just to have food, but you need to optimize food cost percentage for making effective business decisions. Whether it is about how much you should charge for items on your menu or maximum profitability when you look for new suppliers, there’s always a way to calculate the food cost percentage. Yes, you heard that right! Fortunately, our Restaurant Business Consultants have a trick you can always use!
Food cost percentage is a metric used to evaluate the cost of the ingredients used in a dish compared to its selling price. It helps restaurant owners determine the profitability of their menu items and enables them to make informed decisions about pricing and menu adjustments.
Calculating Food Cost Percentage
Determining the Cost of Ingredients –
To accurately calculate the food cost percentage, it’s essential to calculate the cost of each ingredient used in a dish. This includes not only the direct cost of purchasing the ingredients but also factoring in wastage, spoilage, and any additional expenses associated with preparing the dish.
The selling price of a dish should cover not just the cost of ingredients but also overhead expenses such as labor, utilities, rent, and other operational costs. Establishing a balanced selling price is crucial to maintaining profitability while remaining competitive in the market.
Let’s consider a hypothetical scenario where the cost of ingredients for a dish is $5, and its selling price is $20. Applying the formula:
Food Cost Percentage = ($5 / $20) * 100 = 25%
This implies that 25% of the dish’s selling price accounts for the cost of ingredients.
Need more tips to control food cost percentage? Reach out to the Professional Restaurant Consultants at Bistro Brain today!
