How To Calculate Food Cost Percentage | 5 mins read

A Step-by-Step Guide on How to Calculate Food Cost Percentage

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Hanh Truong

By Hanh Truong

Introduction to Food Cost Percentage

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Restaurants and other foodservice businesses incur different types of operational expenses, such as rent and utilities. However, a key element to operating costs that business owners must proactively control is food costs. This entails purchasing ingredients and maintaining the right amount of inventory at all times to serve customers. Monitoring food cost is important for businesses in the dining industry. In fact, 52% of restaurant executives say that food costs are their main challenge, per reports from 2019 studies.

By understanding how to calculate food cost percentage, restaurant management teams can effectively track their profitability. It will also help them generate smart business decisions, regarding menu pricing, food waste, and vendors. With these advantages, executives can protect their bottom line and ensure their operations thrive in the long run.

Food Cost Percentage 101

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Food cost percentage is a measurement that demonstrates how much revenue is used for a restaurant's food and beverage inventory. To determine an eatery's food cost, management teams can calculate their total food cost percentage and their food cost percentage per dish.

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Total Food Cost Percentage

Total food cost percentage measures food supply expenses and the total revenue generated during a given period. Restaurant executives can calculate their total food cost percentage using the following formula.

  • Total Food Cost Percentage = (Total Cost of Goods Sold / Total Revenue) x 100

Steps to Calculating Total Food Cost Percentage

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To effectively use the total food cost percentage formula for all menu items, managers can use the following steps.

1. Find the Cost of Goods Sold
The cost of goods sold is the cost of food and beverages that the restaurant sold during a given period. Also known as COGS, the cost of goods sold is generally in the dollar value. It can be determined by using the following formula.

  • Cost of Good Sold = (Beginning Inventory + Purchases) - Ending Inventory
This means executives will need to track their inventory at the start of a period. Staff must then make note of any stock replenishment purchases throughout the time frame and add the dollar value to the beginning inventory. Once the end of the period arrives, executives should count their inventory again and subtract the new cost to the sum.

For example, a full service Italian restaurant begins its first week with $10,000 of pasta, sauce, wine, and vegetables. By Wednesday, they purchase more inventory for $5,000. By the end of the first week, they have an ending inventory of $6,000. To find their COGS, their calculations would be the following.

  • COGS = (10,000 + 5,000) - 6,000
  • COGS = 15,000 - 6,000
  • COGS= $9,000
2. Find the Total Revenue
Typically, restaurants can find their total revenue for a specific time period by checking their point-of-sale (POS) system. Modern POS software will give users the opportunity to assess their weekly, monthly, and yearly sales.

3. Divide COGS by Total Revenue
After identifying the total revenue, restaurant managers can divide it by the COGS. For example, if the Italian restaurant has total revenue of $15,000 for the week, the calculations would be the following.

  • 9,000 / 15,000 = 0.60
4. Multiple by 100
Once the COGS is divided by total revenue, the value must be multiplied by 100. The final number will be the restaurant's total food cost percentage. Following the previous example, the Italian restaurant has a 60% food cost percentage.

Food Cost Percentage Per Dish

Food cost percentage per dish enables restaurant managers to break down the costs of creating one dish. To calculate this value, eateries can use the following formula.


  • Food Cost Percentage Per Dish = (Total Cost of Dish / Price of Dish to Customers) x 100

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Steps to Calculating Food Cost Percentage Per Dish

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In order to effectively utilize the food cost percentage per dish formula, restaurant teams should consider the following steps.

1. Find the Total Cost of Dish
The first step entails summing up the price of ingredients for a menu item. For example, the manager of the Italian restaurant wants to find the food cost for their specialty steak. To find the individual cost for ingredients, the manager must calculate the quantity of each ingredient they use for one serving and its price.

They discovered that to make one dish of steak, they need 8 ounces of beef, 5 tablespoons of sauce, and 1 potato. They then calculated the cost for each ingredient, which results in the following.

  • 8-ounce steak - $12.00
  • 5 tablespoons of sauce - $3.00
  • 1 potato - $0.10
  • The total cost for steak per serving equals $15.10.
2. Identify the Price of Dish to Customers
This refers to what the price of the dish is on the menu. Following the previous example, the menu price for the dish is $30.

3. Divide the Total Cost of Dish by the Price of Dish to Customer
After identifying the total cost of the dish per serving and its restaurant menu price, managers must divide the values. Therefore, the calculations for the steak would result in the following.

  • 15.10 / 30 = 0.50
4. Multiply by 100
Finally, multiply the quotient by 100 to find the food cost percentage per dish. For example, the Italian restaurant's steak dish has a 50% food cost percentage.

Key Takeaways to Food Cost Percentage

  • Identifying food cost percentages will enable restaurant management teams to gain visibility into how much they spend on food and beverage supplies.
  • The two food cost values that restaurants should measure are total food cost percentage and food cost percentage per dish. The former refers to expenses for a restaurant's entire food inventory, while food cost percentage per dish is expenses for one serving.
  • These percentages can be calculated using their own respective food cost formulas.
  • By calculating these percentages, restaurant managers can track their profit margin and assess their menu pricing for each dish.

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