Cost and price in, percentage out
Is your food cost percentage where it should be?
You already know what the dish costs. This tells you what that costs you.
This is the inverse of the other calculators on this site. There is no ingredient table here because you are not costing a dish — you already have the cost, and you want to know what percentage of the selling price it represents, what gross profit that leaves, and whether the answer is anything to worry about.
Type the cost of one serving and the price you charge for it. You get the food cost percentage, the gross profit in pesos, the gross margin, and a plain-language read on the result. Change the price and watch the percentage move; that relationship is the whole of menu pricing and it is worth developing a feel for.
One warning about the number you are about to see. A food cost percentage is a ratio, and ratios can be improved in ways that make a business worse. Cutting portions improves the percentage. Substituting a cheaper ingredient improves the percentage. Raising the price improves the percentage. Whether any of those improved the business depends on whether people keep buying the dish, and the ratio cannot tell you that.
What the percentage is actually telling you
food cost % = cost per serving / selling price x 100
gross profit = selling price – cost per serving
gross margin % = gross profit / selling price x 100
Food cost percentage and gross margin are the same fact from two directions: a 30% food cost is a 70% gross margin. Neither is profit. Both sit above every other cost in your business.
Common ranges, and why they are not rules
You will see 28 to 35 per cent quoted as the healthy band for food. It is a reasonable starting point for a full-service restaurant in a market with typical rent and wages. It is close to meaningless applied to a coffee shop, where drinks routinely run under 20% and the business is really paying for rent and labour, or to a steakhouse where 40% on the protein is normal and made up on volume and beverage.
What matters is whether your gross profit in pesos, multiplied by the number you sell, covers everything else and leaves something over. A dish at 45% food cost that sells three hundred times a week can be more valuable than a 22% dish that sells nine times.
Improving the number honestly
Buy better before you portion smaller. A supplier negotiation or a switch to a cut with less trim loss improves the percentage without the customer noticing anything.
Fix yield before you fix recipes. Waste at prep is invisible on a costing sheet and expensive in reality.
Reprice deliberately, in whole steps, and change the menu description at the same time so the value story moves with the price.
Check your delivery channels separately. The same dish at the same price is a different business through a platform taking twenty per cent.
Questions people actually ask
Should I use ingredient cost or total cost for the percentage?
Convention is ingredients only, because that keeps the number comparable across periods and against other operators. Track packaging and labour as their own lines rather than folding them in silently.
What if my selling price includes VAT?
Use the price excluding VAT. Comparing a cost that has no tax in it against a price that does will understate your food cost percentage by roughly the tax rate.
Is a very low food cost percentage always good?
No. Very low percentages often mean small portions or a price the market will eventually resist. It can also mean you are leaving quality on the table in a category where customers would happily pay more for better.
Why does my percentage differ from my monthly stock-take figure?
A recipe costing tells you what a dish should cost. A stock-take tells you what actually left the store, including waste, over-portioning, staff meals and theft. The gap between them is the operational problem worth chasing.
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Related
This calculator gives estimates based on what you enter. Real profitability also depends on labour, rent, utilities, taxes, delivery commissions, waste, discounts, and other operating costs.