Food cost in your restaurant is controllable. While running a restaurant is a constant whirlwind of variables and challenges; your food cost is something that you can directly influence and manage and that is going to have a direct impact on the health of your restaurant.

Too many times, operators overcomplicate this straightforward process. You have a million things going on and trying to perfect your numbers down to the penny only adds to that stress. If your restaurant has enough cashflow to hire someone to work on this, go ahead, but if you’re busy running around operating your restaurant, I’m here to show you that this doesn’t need to take a lot of your time.

The Formula

Figuring out your food cost is a simple formula: Purchases divided by sales equals cost of goods sold. The real challenge comes in when you try to apply this to individual plates. You’re trying to get the actual cost of each plate, juggling multiple recipes, dealing with fluctuating vendor prices, and compensating for inconsistent yields.

You don’t need a complicated spreadsheet or software to do this. I used to do it on scratch paper in my own restaurants. Inside this free Toolkit, there is a spreadsheet that will do that quick calculation for you.

An even simpler way is to calculate your entire restaurant’s food cost on a weekly and monthly basis. Apply the same formula to all food-related purchases and sales.

If you’re in the green zone, you’re good to go. But if your costs are creeping up higher than you’d like, it’s time to dig deeper into why that’s happening. There are five things I have my clients look at in their restaurant when costs are higher than they’d like: waste or spoilage, purchasing, theft, design, and portioning.

A word of warning, if you try to attack all five of these problems at once you won’t make enough of an impact on your food costs because you won’t be able to go deep enough. I go into much further detail in this video, but choose one to start with.

The Right Price

During every Office Hours, members ask about pricing menu items and whether they should raise prices to hit food costs.

My favorite (and easiest) way to know what to charge is to determine your plate cost and multiply that by three or four. This quick calculation serves as a starting point for setting your menu prices.

Then comes the important question—is this a price that my guest is willing to pay?

This is where you gauge the value of your offerings from the customer’s perspective. If the answer is a resounding yes, that’s fantastic! Your job is done, and you’ve found a price point that aligns with your customers’ expectations.

But if it’s a no, it’s a cue to go back to the drawing board and work on the product, not the price. Perhaps you can refine the dish, improve the quality, or add extra value to make it more appealing to your guests. By focusing on the product, you not only meet your food cost objectives but also keep your customers satisfied, ensuring their return and continued support of your restaurant.

Don’t Make These Food Cost Mistakes

Let’s clear up some common misconceptions that often trip up restaurant owners:

1. Labor is not part of food cost. It’s a separate labor cost. It does factor into your prime cost but it is NOT part of calculating your food cost.

2. Make sure you are not looking at your total sales or your total purchases. You must compare your food purchases to food sales.

3. Timing is everything—make sure you are comparing the right period. You might receive food on November 1, but pay the invoice 30 days later. If you’re calculating last week’s food cost, you must use the invoices from the week it arrived, not when the invoice was paid.

4. Make sure you are only including food. Just because it came from your main food supplier doesn’t automatically classify it as food. Sauté pans, chemicals, to-go containers, cleaning supplies—these are all examples of things that don’t belong in the food category of your purchases.

5. There is no “right” or “good” food cost number. There’s no one-size-fits-all industry standard. While lower is better, you can’t just assume that any food cost over 30 percent is bad. It all depends on your unique circumstances.

Calculating your numbers may seem confusing or challenging at times, but there are tools available to simplify things, like clickBACON, which automates the process for you.

But Aren’t I Supposed to Take Inventory?

You’ve probably heard or concluded that taking inventory is essential for accurate food cost. Technically it’s true, but you have to determine if the juice is worth the squeeze.

Even the simplest inventory systems are going to cost you at least $500 per month and add 30–40 hours a month onto your already busy schedule. Is it really worth the effort to discover that your food cost is 1 percent higher than you originally thought?

If you’re a smaller independent restaurant (my rule of thumb is less than five units doing less than 10 million per year) OR you’re wearing a lot of different hats as the operator, it’s just not going to be worth it.

Taking Charge of Food Costs

Your restaurant will always have a new obstacle for you to overcome, but food cost is something you can conquer. Remember, it’s not about complexity, it’s about control.

Now you know the common pitfalls to avoid so you can focus on calculating your food cost, establishing the right menu prices that guests are happy to pay, and you have a few tools at your disposal.

It may not be the sole factor, but controlling your food cost is critical to the success of your restaurant. Keep striving for excellence, streamlining your operations, and exceeding your guests’ expectations.

Source: Ryan Gromfin, FSR