In the restaurant business, it's important to know how to calculate food cost. This will help you understand what your menu items are costing you and allow you to make adjustments as necessary. Calculating the food cost for your restaurant is really quite simple and can be done by anyone who understands how to work with numbers. Here's a quick guide on how to calculate food costs in your restaurant.
How To Calculate Food Cost For Your Restaurant
Start with the menu price of each item. Then, multiply this price by the amount of food in the portion. For example, if you were selling a steak that costs $20 and has six ounces of meat along with four side dishes, you would multiply 20 by 6 to get your answer. The total product is 120 ounces, which means your cost per ounce is $0.166 - or 16% of the final product price.
Another way to look at food cost is by simply dividing the total number of ounces by the menu price of each item on your menu. As an example, if you have a steak that costs $20 with seven ounces of meat, divide 20 by 7 and then multiply the answer by 100 to get your percentage. This calculation will tell you that your cost is 14.29%.
Food Cost Percentage
Ideally, the food cost of a restaurant should be 30% or less. This means that for every dollar you charge for food, 70 cents are made up of things other than the product being sold. If your costs are higher than this, you may need to find ways to cut costs. Lower food costs mean that there is more money available for payroll, inventory and equipment expenses.
A simple way to calculate your food cost percentage is to take the number of ounces sold out of the total number of ounces purchased from a supplier and then multiply the answer by 100. Once again using steak as an example, if you purchase 100 ounces from a supplier and sell 120 ounces in one month, the food cost percentage is 20%.
So now you have all the information you need to calculate your restaurant's food cost. If it's too high, don't worry - there are ways to bring it down without compromising your menu items. Instead of raising your menu prices, find ways to cut costs.
Tips to Reduce Food Cost
You can lower the amount of food cost in your restaurant by removing some potentially costly menu items. If you're selling a steak that has four ounces of meat, charge more per ounce to increase profitability and lower the total number of ounces sold, thus lowering your food costs. Or, look into purchasing smaller cuts of meat and serving fewer ounces per portion, thus increasing your profit margin per ounce.
You can also reduce food costs by making use of leftovers and minimizing waste. Make sure you have a system in place for recording what's being thrown out so that you know how much to order from your supplier the next time around. If a customer doesn't want a side dish that's been included with their meal, take it back and don't charge them for it.
Calculating food costs is important for running a successful restaurant. If your food costs are too high, find ways to cut back while keeping the same menu items and profitability.
