Whether you're putting together a menu for your newly opened restaurant or trying to budget for weekly expenditures, calculating food cost is one of the most essential pieces of information you can possess as a restaurant owner/operator.
The importance of calculating food cost
As a restaurant owner/operator, profitability is the number one priority to ensure the longevity of a brand. In the scope of a restaurant, the primary moneymaker is the food itself and hence without knowing the food cost of each menu item, there is no way of knowing whether or not each dish is actually generating any profit. Food cost takes into consideration everything that goes into preparing a dish, from the ingredients themselves to the rent and labor costs involved.
Step-by-step guide to calculating food cost
Read on to learn how to calculate food cost at your restaurant.
- Break up each dish into its ingredients. Everything from seasoning to how much cooking oil is added.
- Calculate the cost of each dish. Combine the cost of each ingredient to come up with the total cost per dish.
- Figure out your fixed cost per meal served. To arrive at this number, add up all the fixed costs that go into producing the dish such as salaries and utilities. Assume your daily fixed costs are $1500 and on average you serve 150 customers per day, this means that your fixed cost per meal served is $10.
- Calculate what percentage of your menu price comes from food. Found by dividing food cost by menu price. Assume that an order of Caesar Salad costs you $3 to produce and you sell it at $7 that means your food cost is 43%.
- Determine target food-cost. If you are selling a dish at $10 and you find that your fixed cost per meal is $7, your dishes can cost you no more than $3 for you to make a profit.
- If you run an established restaurant, make sure to check each dish to determine whether or not the price covers the food cost and fixed price per dish. From here it is a lot easier to get a bigger picture of your restaurants daily operation and whether or not it is possible to break even or even turn over a profit.
Food Cost Calculation for Burger Priced at $9
|Cost of Ingredients:|
|Cost of Beef Patty||$1.03|
|Cost of Hamburger Buns||$0.20|
|Cost of Lettuce||$0.10|
|Cost of Tomatoes||$0.07|
|Cost of Ketchup||$0.02|
|Cost of Pickles||$0.10|
|Cost of Oil for Grilling||$0.05|
|Overhead Costs Per Hamburger (Labor, Electricity, Gas)||$0.50|
|Food Cost Percentage||23%|
Tip: It is important to understand whether or not different items require different food cost percentages. If you are running a fine dining restaurant where prices are higher, you can get away with a higher food cost, but if you run a small neighborhood eatery with more affordable prices, you'll want to lower your food cost to take advantage of the smaller profit margins.
Download a Food Cost Calculator For Excel
To make things easier for you, we have put together a free food cost calculator excel sheet that can streamline the entire process. The excel sheet not only allows you to calculate the food cost per item, but to also add important details such as pictures, notes, and allergy information about each dish.
Save yourself countless hours and download our easy to use food cost calculator now.