Calculating Food Cost Percentage the Right Way

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By Deagon B. Williams

In a perfect world it would be great and easy if you bought $100 worth of food and sold it all that night. Knowing our food cost would be simple, and so would calculating food cost percentage. But we don’t sell everything every night and we order in advance. So we take a food cost inventory as a means of drawing a line in the sand and measuring how well we manage our restaurant. We can affect food cost by how well we manage our perishable inventory, how well our staff is trained, how well we order just enough but not too much. In many ways, a food cost percentage can be called the financial weather vane of a kitchen.

FORMULA: food cost/ gross sales x 100 = food cost %

But, how for real? How to calculate food cost in real life? The basic idea is that a business needs to know how much money it is spending to make money. A food cost is one important  measurement.  So you buy food, turn it into some amazingly delicious dish, and sell it. Then once a month you take a physical inventory. This inventory is crucial and cannot be skipped because it is money sitting on your shelves. If you do not take a physical inventory your food cost will appear higher than it really is and that increase will be inconsistent from month to month. The inconsistency will throw all of your numbers in a way that renders all reporting useless.

So- you’re sold on doing inventory to get your food cost right? Well, here are two very important things to do make sure your inventory comes out clean: (1) Do your inventory in regular, equal intervals- weekly, monthly or quarterly. Set a schedule and stick to it! (2) Always run your inventory the same way. If you inventory spices one time, do it every time. There can be a 52-36% variance depending on who took the inventory- with the same things sitting on the shelf, depending on how you count.

Ultimately, taking inventory and determining your food cost and food cost percentage will give you insight into, and control over, your business in ways you didn’t have before. Its well worth the effort to do the right way- your pocketbook will thank you.

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