Restaurant Food Cost: How to Calculate It and Keep It Under Control

Few restaurants fail because the food is bad. Many fail because the food costs more than the owner thinks it does. A supplier raises the price of chicken by eight percent, nobody updates the menu, and a dish that made money in March loses it by June.

Food cost is not hard to control. It is hard to see. This guide covers how to calculate it, per plate and for the whole kitchen, and how to notice when it moves.

Two numbers with the same name

"Food cost" means two different things, and you need both.

Plate cost is what the ingredients in one dish cost you. It is used to set prices.

Food cost percentage is what you spent on food as a share of what you sold. It tells you how the kitchen as a whole is doing.

A restaurant can have well-priced plates and a bad overall percentage, because of waste, over-portioning or theft. The gap between the two is where the money goes.

Cost one plate

Take a dish and list everything on it, with the amount and what that amount costs you.

Here is an example with made-up prices, to show the method:

Ingredient	Amount	Cost
Beef patty	6 oz	$2.10
Bun	1	$0.45
Cheese	1 slice	$0.30
Lettuce, tomato, onion		$0.35
Sauce	1 oz	$0.15
Fries	5 oz	$0.55
Plate cost		$3.90

Two things are easy to miss:

• Yield. You pay for a whole onion and use most of it. You pay for raw meat and serve it cooked and trimmed. Cost the amount you buy to get the amount you serve.
• The small things. Oil, seasoning, the pickle, the sauce on the side. Each is pennies. Across a year of covers they are real money.

Price it

Divide the plate cost by the menu price to get the food cost percentage for that dish.

If the burger above sells for $13, its food cost is $3.90 divided by $13, or 30%.

To work the other way, divide the plate cost by the percentage you are aiming for. At a 30% target, a $3.90 plate should be priced at $13.

There is no single correct target. It depends on your concept, your rent and your labor. A steakhouse will run higher than a pizzeria and make it up in other ways. What matters is that you choose a target, and know which dishes miss it.

In Toadee, you can enter a cost against each menu item, and the item then shows its margin beside its price. A venue-wide default markup can suggest a price from the cost. Both are in the menu tools on every plan.

Look at margin in dollars as well

A percentage can mislead you.

A pasta that costs $3 and sells for $14 has a 21% food cost and leaves you $11. A steak that costs $14 and sells for $34 has a 41% food cost and leaves you $20.

The steak has the worse percentage and pays almost twice as much per plate. You pay rent in dollars, not percentages. Judge each dish on both.

Then put that beside how often each dish sells:

• Sells well, good margin: protect it. Do not change it.
• Sells well, thin margin: reprice it, or adjust the portion or the recipe.
• Sells slowly, good margin: move it up the menu, describe it better, have servers mention it.
• Sells slowly, thin margin: take it off.

Toadee's sales reports show your top items and revenue by category, and the profit report shows margins by category from your item costs.

Keep costs current

The weakness of a costed menu is that it goes out of date the day a supplier changes a price. A sheet you built in January is fiction by summer.

The fix is to cost from recipes that are tied to what you actually pay.

With inventory set up in Toadee, each stock item carries its current cost. Link a recipe to a menu item, and the item's cost is worked out from those ingredient prices. When a vendor raises the price of beef, the cost of every dish that uses it updates, and so does its margin. You see the change in a report, not in a thin month.

Find the gap between paper and the kitchen

Now compare what you should have used with what you did.

If you sold 200 burgers at 6 ounces of beef each, you should have used 75 pounds. If your counts and deliveries say you used 90, there are 15 pounds to explain. The usual causes are, in rough order:

1. Portions. A cook's "6 ounces" is often 7.
2. Waste. Spoilage, trim, dropped plates and remakes.
3. Unrecorded food. Staff meals and free plates that never reached a ticket.
4. Theft. Less common than the first three, but it happens.

Toadee's Inventory Variance report does this comparison for each stock item and flags those used more than expected. It needs a physical count to be meaningful, and marks any item without one in the period as "needs count."

Habits that keep it down

• Portion with tools. Scales, scoops and ladles. Eyeballing drifts upward.
• Count your most expensive items every week. Proteins first. They are most of your food spend.
• Order from what you have. In Toadee, low-stock items raise an alert, and a purchase order can be generated from them.
• Record waste and staff meals. A number you write down is a number you can reduce.
• Review prices when costs move, not once a year. Small, regular changes are easier on guests than one large one.
• Keep the menu short. Every extra dish is more stock that can spoil.

A monthly routine

1. Count the full kitchen.
2. Work out food cost percentage for the month.
3. Check the variance on your ten most expensive ingredients.
4. Look at margins by dish, and pick the two worst that sell well.
5. Fix those two: price, portion or recipe.

Two dishes a month is enough. In a year you will have reviewed the whole menu.

Item costs and margin display are part of Toadee's menu tools on every plan. Sales and profit reports are on Basic and up, and inventory, recipes and the variance report are on Pro. The pricing page has the full comparison. Bars face the same problem with liquor: see how to spot bar shrinkage.