The term food cost really refers to food cost percentage. A food cost percentage is not exactly the same thing as COGS (cost of goods sold), but it is the same concept and the terms are used interchangeably.
Most importantly is an understanding of the concept and the ability to use the concept with ease.
So, what’s a food cost for a restaurant and how do COGS work? Well it refers to the amount of money that one pays for the cost of the food they sell. This is calculated in both a nominal number and a percentage. The percentage is important because it shows a key relationship between the top line and the bottom line. And without this percentage or key relationship indicator we have no idea how well one is running and managing a business. But, the nominal figure is also very important since what can be deposited in the bank account.
The formula looks like this: Portion cost divided by the menu price
So…. The portion cost of a calamari appetizer is $2.50/ 8.50 = .294
Then multiply by 100 to get the percentage so .294 x 100= 29.4%
Give it a try, it gets easier with practice.
And feel free to let me know if I can walk you through how to do food cost analysis or how it went as you tried. It’s a powerful tool and certainly worth the effort. Leave a comment and I’ll get back to you.
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