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What Is the Definition of Food Cost Percentage?

Food cost percentage is one of the most critical metrics in the restaurant business. It can mean the difference between a profitable restaurant and one that isn’t.

High operating costs and the cost of the food itself are some of the biggest challenges for a restaurant business. By knowing your food cost percentage, you’re closer to ensuring success.

In order to calculate your food cost percentage, you take the cost of the goods sold and then divide that by the revenue or sales of the menu item that is served to the public. When you have a good food cost percentage (typically between 28% and 32%), you can concentrate on other parts of your business.

 

How Do You Calculate Food Cost Percentage?

The following formula is the best way to calculate food cost percentage:

Food Cost Percentage = (Beginning Inventory + Purchases – Ending Inventory) / Food Sales

Need an example? Here’s a quick one for you.

  • Beginning Inventory = $10,000
  • Purchases = $3,000
  • Ending Inventory = $11,000
  • Food Sales = $10,000
  • Food Cost Percentage = (10,000 + 3,000 – 11,000) / 10,000
  • Food Cost Percentage = 2000 / 10,000
  • Food Cost Percentage = 0.2 or 20%

As you can see in the example above, this restaurant needs to work to improve their food cost percentage!

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