Calculating how much the food you sell costs you to sell is a very important practice in running a profitable restaurant. Knowledge is power, and knowing your food cost compared to your sales and your ideal food cost is very empowering information. By figuring your food cost percentage, you have an early warning system to alert you to potential theft and waste.

Before we get into the process for calculating food cost, it’s good to talk about how often this should be done. I suggest calculating your food costs at the end of every week. If you happen to have a cost control issue, it’s best to know as close to the time the occurrence happened as possible. The farther you get away from an occurrence that caused a cost problem, the harder it is to determine what that occurrence was.

You are going to need to track a few pieces of information to calculate your food costs. You will need to know:

• How much is my starting inventory for the period I am evaluating?
• How much is my ending inventory for the period I am evaluating?
• How much food did I purchase during that period?

This is all the information necessary to calculate actual food costs for any given period. How long that period is depends on you. As I said, I suggest evaluating food costs every week.

In addition to knowing your actual food costs, you’ll need a couple other pieces of information to compare the actual food cost to:

• What is your ideal food cost for the period being evaluated? (we’ll discuss how to calculate ideal food cost also)
• What are your total sales for the period being evaluated? (you’ll also need to track your sales by item to calculate your ideal food cost)

Now let’s go one step at a time to get these powerful pieces of information.