Understanding your food cost in your restaurant is very important. Let’s cover the food cost formula. Watch this video (or keep reading) to learn the food cost formula.
When you want to find your restaurant’s food cost, it would be nice to have a food cost calculator. But since that’s really lacking, let’s instead focus on the food cost formula so you can calculate it yourself anytime.
What Is the Food Cost Formula?
- Beginning inventory (what you started with on the shelves) +
Purchases (if it crosses your backdoor threshold in this period, it is a cost today) =
Total amount of product we could use
If you close your restaurant today, that is the money you have sitting on your shelves.
Then at the end of the period – end of week or end of month – take ending inventory to get use.
Use is what leaves the shelves – no matter how it leaves the shelves. Ideally it’s sold. But it could be wasted, stolen or taken home by the owner without being recorded.
Take your gross sales (before discounts and not including sales tax) and divide it into Use.
Ultimately, the food cost formula is:
Beginning inventory + Purchases – Ending = Use/Sales = Food Cost
Knowing your food cost is important so you can put controls in place to keep your food cost in line and make the money you deserve.
Read about the prime cost formula here as well.
If you would like to learn ways to control restaurant costs and apply the food cost formula to your restaurant’s numbers, read our free special report, Is Your Food Distributor Screwing You? 5 Things You Can Do Now to Lower Food Cost. Download it here. Be sure to visit my YouTube channel for more helpful restaurant management video tips.