What To Do When Actual Food Cost Is Much Higher than Ideal Food Cost

A common question I get from restaurant owners is, “Why is my actual food cost so high and why is it so much more than my ideal food cost?” The second part of that question is what to do if your actual food cost is running much higher than your ideal food cost. These are age-old questions in the restaurant industry and a puzzle to be worked out so every week you have a higher chance of making money.

In this episode of “The Restaurant Prosperity Formula,” I teach you how to calculate your ideal and actual food costs and what systems and data you need to calculate them properly. I also talk about why these two numbers are so important to making money and the kinds of things you can do to get the numbers to line up more closely. Plus I offer you a series of kitchen systems you can put in place to control your food cost and run a tighter operation.

Before we get too far into this, know that to properly calculate your ideal food cost, you need three things:

1. Current, up-to-date accurate recipe costing cards, both for your batch recipes such as soups, side dishes, sauces, components to dishes, desserts, anything you manufacture yourself, plus your item recipe cards, which is anything you sell to your guest.
2. A point of sale system that you can use to run a PMIX report, which is also knowns as a product mix velocity report, or an item-by-item sales mix report. This report tells you what you sold at any point in time.
3. Weekly food inventories because it’s essential to know what's on your shelves to properly calculate your food cost.

Next, I explain what your ideal food cost is and how it is calculated. Your ideal food cost is what your food cost should be if your kitchen operated perfectly (which will never happen), there was no waste, no theft, and no spoilage. This is based on what your customers actually ordered and uses a weighted average, which I explain fully.

I’ll also explain how to calculate your actual food cost and what can lead to it being so much higher than your ideal food cost.

Another thing I teach in this episode is how to set realistic expectations around food cost, knowing that even a rock star kitchen manager is likely to run 1.5–2 percentage points above ideal, and why this is the case.

And lastly, I am going to offer you a list of systems you can put in place to immediately lower your food cost 2–3 percent immediately along with another set of systems you can put in place to control the number and get as close to ideal as possible.

Many of you reading this and deciding whether to listen to the podcast right now don't have the three essential things in place. Here's the beautiful part: use the exact same eight systems I list in this episode and while you won't know ideal food cost or your actual food cost, you will see your bank account getting larger. If you think your actual food cost is too high, it probably is. And this episode is a great starting point to starting the work to lower it.

Click the podcast player above to listen in, or you can watch the video on YouTube, click here to download the latest episode.