Optimise Your Food Costs for a Profitable Christmas Season and Beyond!
With food sales making up the majority of revenue for restaurants, keeping a close eye on your food cost percentage is vital to maximising your profits. Here’s everything you need to know about calculating food cost percentage and why it’s an essential tool for restaurant success.
What Exactly is Food Cost Percentage?
In essence, food cost percentage is the ratio of the cost of ingredients used to create menu items compared to your total restaurant sales, expressed as a percentage. For example, a food cost percentage of 30% means you’re spending 30p for every £1 your restaurant brings in.
Restaurants typically aim for a food cost percentage of 28-35%, but every business is unique. Your ideal range will depend on your menu and location, whether you’re serving up classic pub fare or gourmet British cuisine.
Why Food Cost Percentage Matters
Using a reliable food cost percentage formula is crucial to maximising profitability. If a menu item’s cost is running too high, you have options: adjust the price, tweak the recipe, or replace it. On the other hand, if an item has a lower food cost, promoting it could bring in more profit. Before adding a new dish, calculating its food cost percentage can help you decide if it’s worth including.
How to Calculate Your Food Cost Percentage
Most restaurants have tools like point-of-sale (POS) systems to handle these calculations automatically, but here’s a manual method if you’re doing it yourself. Ensure you’re consistent in the timeframe you use for each variable to get accurate results.
Total Food Cost Percentage Formula:
Cost of Goods Sold (COGS) Formula:
To calculate COGS, start with your opening inventory, add any new purchases, and then subtract the ending inventory.
Per-Dish Food Cost Formula:
For a specific menu item, determine each ingredient’s cost, and then calculate the cost of a single serving.
Pricing Your Menu Using Food Cost Percentage
Using your food cost percentage as a guideline can help set the right prices. For example, if a burger costs £3 to make and your target percentage is 30%, charging around £10 is ideal. Menu pricing involves more than just food costs – factors like local competition and customer demographics are key to finding the sweet spot.
Making the Most of Food Cost Percentage
Knowing your food cost percentage gives you insight to make impactful changes. Here are some tried-and-tested strategies:
- Menu Engineering: By analysing costs, popularity, and profit margins, you can identify your high-performers and redesign your menu accordingly, adding visual cues and attractive descriptions for these items.
- Minimise Food Waste: Better inventory control and creative menu planning can help reduce food waste, saving costs while also benefiting the environment.
- Explore Supplier Options: It’s worth reviewing supplier costs from time to time – loyalty is great, but sometimes you need more competitive pricing. A little negotiation might also yield savings with current suppliers.
- Adjust Portion Sizes: If you’re noticing that portions often go unfinished, consider offering smaller portions. This change can reduce waste and manage food costs more effectively.
- Invest in Technology: Managing your numbers by hand can be challenging. Digital tools help streamline tracking and provide you with real-time data, giving you an edge in managing costs efficiently.
By managing your food cost percentage, you’re setting up your restaurant for a healthy profit margin and stronger financial footing. Keep refining your approach and watch your profitability grow!
