The food cost percentage formula
Food cost % = cost of food sold ÷ food sales
Cost of food sold = beginning inventory + purchases − ending inventory
The point of the inventory adjustment is that you want the food you used, not the food you bought. A big delivery on the last day of the month is still on the shelves and belongs to next month. Each month's ending count becomes the next month's beginning inventory.
For a single dish the formula is simpler: plate food cost % = plate cost ÷ menu price. And turned around for pricing: menu price = plate cost ÷ target food cost %.
Worked example: monthly food cost % and one menu price
The upper block is the month, the lower block is one dish. Inputs are yellow, every result is a formula. The restaurant and its numbers are fictional.
| A | B | Formula in B | |
|---|---|---|---|
| 1 | Harbor Lane Bistro, September | Value | |
| 2 | Beginning food inventory ($) | 9,180.00 | |
| 3 | Food purchases ($) | 43,480.00 | |
| 4 | Ending food inventory ($) | 8,740.00 | |
| 5 | Staff meals and transfers to the bar ($) | 760.00 | |
| 6 | Food cost, cost of food sold ($) | 43,160.00 | =B2+B3-B4-B5 |
| 7 | Food sales, net of sales tax ($) | 138,600.00 | |
| 8 | Food cost % for the month | 31.14% | =B6/B7 |
| 9 | Theoretical food cost, POS × plate costs ($) | 40,180.00 | |
| 10 | Theoretical food cost % | 28.99% | =B9/B7 |
| 11 | Variance (percentage points) | 2.15% | =B8-B10 |
| 12 | Variance in dollars | 2,980.00 | =B6-B9 |
| 13 | One dish: braised short rib | Value | |
| 14 | Plate cost ($) | 8.45 | |
| 15 | Current menu price, net of tax ($) | 29.00 | |
| 16 | Plate food cost % | 29.14% | =B14/B15 |
| 17 | Target food cost % | 28.0% | |
| 18 | Price at the target ($) | 30.18 | =B14/B17 |
| 19 | Menu price, rounded up to $0.50 ($) | 30.50 | =CEILING(B18,0.5) |
| 20 | Food cost % at the new price | 27.70% | =B14/B19 |
| 21 | Contribution per plate at the new price ($) | 22.05 | =B19-B14 |
Step 1: food cost for the month
Harbor Lane Bistro started September with $9,180 of food in stock, bought $43,480 during the month and counted $8,740 at the end. $760 of food went to staff meals and to the bar for cocktails, so it is taken out of food cost and booked where it belongs. Cost of food sold: $9,180 + $43,480 − $8,740 − $760 = $43,160.
Food sales were $138,600, so the food cost percentage is $43,160 ÷ $138,600 = 31.14%. Use sales without sales tax or VAT and without tips, and keep beverages out of both lines. Bars have their own pour cost, which is calculated in the same way.
Step 2: actual vs theoretical food cost
31.14% says nothing on its own. The useful comparison is with the theoretical (or ideal) food cost: the number of each dish sold, from the POS, times its plate cost from the standard recipe. For September that is $40,180, or 28.99% of food sales.
The gap is 2.15 percentage points, or $2,980 in one month. That money went somewhere: waste, over-portioning, spoilage, theft, comps that were not rung up, or simply a counting error. Most restaurants accept a small gap, often around one percentage point. A bigger one is worth an item-by-item count of the expensive proteins.
Step 3: plate cost and the menu price
The braised short rib costs $8.45 a plate, including trim loss and a small allowance for oil, spices and garnish. At $29.00 it runs at 29.14% food cost, above the bistro's 28% target. The price that hits the target is $8.45 ÷ 28% = $30.18. Menus use clean price points, so round up with CEILING(…,0.5) to $30.50, which gives a food cost of 27.70%.
Do not price by adding the target percentage to the cost. $8.45 × 1.28 is a markup, not a food cost %, and would put the dish at $10.82. The markup vs margin guide explains why multiplying and dividing give such different answers.
What is a good food cost percentage?
Many full-service restaurants aim for roughly 28–35%, but the right figure depends on the concept. Pizza, pasta and coffee can run well below that, while steakhouses and seafood restaurants often run higher. A better test than any rule of thumb is prime cost: food and beverage cost plus total labour cost, which full-service restaurants commonly try to keep at around 60–65% of sales.
Also remember that guests pay the rent in dollars, not percentages. At $30.50, the short rib leaves $22.05 per plate. A pasta at 20% food cost and $18 leaves only $14.40. The dish with the higher food cost % can still be the more profitable one, which is the idea behind menu engineering and behind a break-even analysis in covers per day.
Common mistakes
- Using purchases as food cost. Purchases are what you bought. Adjust for the change in inventory to get what you used.
- Dividing by total sales. Food cost goes over food sales and beverage cost over beverage sales. Mixing them hides problems in both.
- Leaving sales tax or VAT in sales. Tax collected is not revenue. It makes the food cost % look lower than it is.
- Pricing with a markup. Plate cost × (1 + 28%) is not a 28% food cost. Divide by the target instead.
- Rounding the menu price down. Round up to your price step, or the dish lands above its target food cost.
- Counting inventory on different days. If the count is not taken on the last day of the period every time, the monthly percentages swing for no real reason.
Frequently asked questions
How do you calculate food cost percentage?
Add beginning inventory and purchases, subtract ending inventory to get the cost of food sold, then divide by food sales for the same period. For one dish, divide the plate cost by the menu price.
What should food cost percentage be for a restaurant?
Many full-service restaurants target roughly 28 to 35 percent, but it varies by concept. Look at prime cost and at the dollars each dish contributes, not only at the percentage.
How do I price a menu item from food cost?
Divide the plate cost by the target food cost percentage. A $6 plate at a 30 percent target needs a $20 price. Then round up to a clean menu price.
What is the difference between actual and theoretical food cost?
Actual food cost comes from inventory counts and purchases. Theoretical food cost is what the dishes sold should have cost according to the standard recipes. The gap shows waste, over-portioning, theft or counting errors.