Understanding food cost

What is restaurant food cost?

Food cost for your restaurant is the cost of ingredients that you have used to prepare the menu items that your restaurants sells.

How to calculate food cost?

Food cost is typically expressed in percentage of revenue that your restaurant makes. So, if your restaurant’s revenue for last month was $1M and you used $ 250K of meat, chicken, seafood, eggs, vegetables, oil, herbs, spices etc. to generate that revenue, then your food cost for that month would be 25%.

A simple way to calculate food cost percentage is below:

Cost of ingredients = 250K

Revenue = 1M

Restaurant food cost equation:

Food cost (percentage) = (Cost of ingredients/Revenue)*100 = (250K/1M)*100 = 25%

What is the average food cost?

Ideally, restaurant food cost may be in the range of 25%-30%. This is the average food cost percentage range for a restaurant. However, depending on the exact type of restaurant you have, the location of your restaurant and other factors, this range could vary.

Food cost template 

Restaurant operators emphasize that keeping food costs below 25-30% is crucial for profitability. However, the challenge lies in accurately tracking these costs in real-time and at the item level. Hence, a software that offers detailed, automated tracking of food costs, can significantly improve profit margins.

If you would like to get a quick idea of what food cost percentage for your restaurant looks like, you could use this free food cost template excel sheet which helps you to calculate the food cost of one recipe.

We recommend using a food cost software like the one we offer, as soon as you can, since getting used to the software in the early days can make it part of the standard operational procedures saving lots of time and money later on.

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