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!

What is the Food Cost Percentage?

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

  • The formula for calculating food cost percentage is straightforward:
  • Food Cost Percentage = (Cost of Ingredients / Selling Price) * 100

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.

Calculating the Selling Price:

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.

Putting the Formula to Work:

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.

Strategies to Control Food Cost Percentage

  • Streamline Operations for Efficiency: Optimizing your kitchen workflow can drastically reduce wastage and improve efficiency. From reorganizing the workspace to training staff on efficient practices, small changes can yield significant savings.
  • Use Technology and Tools: Embrace technology! There are fantastic inventory management systems and software that can help track ingredient usage, monitor stock levels, and even forecast demand. Investing in these tools can be a game-changer.
  • Menu Engineering Beyond Cost: It’s not just about the numbers. Sometimes, the most profitable dishes aren’t the ones with the lowest food cost percentage. Factor in popularity, customer preferences, and complementary items to strategize menu changes effectively.
  • Train Staff on Cost Awareness: Educate your team about the importance of cost control. When staff understand the impact of waste and the value of portion control, they become active contributors to cost management.
  • Regularly Review and Adjust Prices: Keep your finger on the pulse of market trends and ingredient costs. Regularly revisiting and adjusting menu prices ensures that you stay competitive without compromising on profitability.

Need more tips to control food cost percentage? Reach out to the Professional Restaurant Consultants at Bistro Brain today!

whatsapp whatsapp