What is the meaning of Food Cost?

The food cost percentage determines how much of the revenue of a restaurant will be used to purchase ingredients. Since food is one of the highest expenses, knowing what the food cost percentage is will help manage the budget of the business. Different restaurants calculate the price of each menu item in different ways. Some may base the price of a menu item solely on their food cost. Others will base the price on the cost of goods sold (COGS), which includes materials used in the preparation of an individual menu item, such as toothpicks, napkins, sauces, etc.

How to calculate ideal food cost percentage

To determine your perfect food cost percentage, you must first identify two values-

• Total food costs
• Total food sales

For Example- If the total food cost is $2,500 and the total food sales are $8,000. To calculate your target food cost percentage, divide your total food expenses by your total food sales. Total food expense = 2,500 / 8,000 Total food cost = 0.31 or 31%