You can calculate your food cost percentage using a variety of methods. One way is to calculate the food cost percentage of the entire business. Or you can calculate the food cost percentage per dish. We'll run through the methods step by step and give you examples to illustrate them.
Food cost percentage for your entire company
To calculate the food cost percentage for your entire company or the actual food costs, you start with the cost of goods sold (COGS). For this calculation, you need an inventory count. This can be a time consuming task if you don't have a smart inventory system, such as stock management integration. However, it's important to keep an overview of your stock.
You calculate the COGS as follows:
Beginning inventory (in euros) + purchased inventory (in euros) – ending inventory (in euros) = COGS.
To clarify, here is a simple example. At the start of the month, the value of your stock was €5,000. During the month, you bought another €1,750 of fresh products. At the end of the month, the value of your stock was €5,500.
€ 5,000 + € 1,750 – € 5,500 = € 1,125
To calculate the food costs of your entire company for a specific period, you need to use the turnover of that period.
You will need the following formula: (COGS / turnover value) * 100 = food cost percentage
Let's say your turnover in a given month was €4,000; the food cost percentage of your hospitality business would be:
(€1,125 / €4,000) = 0.28 = 28%
The actual food cost percentage for this period was therefore 28%, which is relatively good.
Food cost percentage of a dish
Calculating the food cost percentage of a dish is a little more involved. You have to add up the costs of all the ingredients in the dish and divide them by the purchase price. Use the following formula:
(Sum of all ingredients in the dish / net purchase price of the dish) = food cost percentage
For example, you have a classic sub. Your ingredients cost €1.50. You sell the sandwich for €6. The food cost percentage of your sandwich is therefore:
€ 1.50 / € 6 = 0.25 = 25%
This percentage is still below 30% and is therefore pretty good. But there are a few other important factors to take into account.
Important factors to take into account when calculating your food cost percentage
As we explained earlier in the article, there are other factors besides purchasing costs that influence your food cost percentage.
Basic ingredients To start with, there are the ingredients you don't include in the calculation but still use. These all add up over time. Olive oil, salt and pepper are some examples. Therefore, always add 1 to 2% to your food cost percentage to account for these costs and to gain a clear and realistic picture of your food costs.
Unused ingredients Remember to consider waste: the ingredients that you bought but didn't use. For example, you have a kilogram of carrots including the greens. After removing the greens and peel, you are left with 800 grams of product. That is 20% less weight. If you bought the kilogram of carrots for €3, you need to add 20% to compensate for the loss. The cost price is therefore €3.60. This also applies to meat and fish. If you buy a kilogram of salmon fillets for €15 but are left with 900 grams after removing the skin, you actually paid €16.50 per kilogram. To compensate for these discrepancies, you should add another 5% to your food costs.
Consistent portions If your portions aren't consistent, your food cost calculation will be misleading. Take measures when devising your dishes so you don't shortchange yourself regarding the cost of your dishes.