“Food costing” is understanding the ratio between the cost of raw materials that make up a solo dish and the revenue generated by that solo dish. By calculating how much was spent, you’ll be able to understand the amount of actual profit you make on your sales. If your food cost is too high, you will struggle to make a profit and keep your business afloat, if your food cost is too low you may be turning off customers with high prices. While other costs may be less flexible (like labor costs and fixed costs – rent, utilities, etc.), food costing needs to be compatible with your actual sales.
The food costing formula is:
Beginning Inventory + Purchases – Ending Inventory) / Food Sales) = Food Cost. A profitable restaurant typically has a 20% – 33% food cost percentage. That can range from 20%-25% for a casual dining eatery and up to as much as 33% for a fine-dining establishment
In order to calculate food cost you are going to need a few integral numbers:
Total AP Cost Inventory and Items – AP (or as purchased) is basically the cost an item per a standardized measure (usually ounces or grams). This is your beginning inventory. You measure your inventory for the time period you choose, however it’s easiest to measure a week’s worth of inventory.
Recipe Item EP Weight & Cost – EP weight is the edible portion amount of each recipe ingredient in a standardized measure. This is the cost of each ingredient in ratio to how much it is used in the recipe.
Recipe Cost Per Servings = Total Recipe EP Cost / Servings
Ending Inventory= The amount of inventory left over after a week.
Total sale amount for menu items = Total revenue from sales. This is your Food Sales.
With these numbers you can find your restaurant’s monthly food cost. Food costing is not a simple process, however it plays an important part in keeping a restaurant on track
Contact us about pricing for our Food and Beverage cost Analysis and inventory management program. We will find where your profit's are going.