How to calculate food cost
Food cost percentage tells you how much of every ringgit of food sales is consumed by ingredients. The formula for a period is:
The formula
Food Cost % = (Beginning Inventory + Purchases − Ending Inventory) ÷ Food Sales × 100
The numerator — beginning inventory plus purchases minus ending inventory — is your cost of goods used. Divide by the food sales that used those goods and you get the percentage.
Theoretical vs actual food cost
There are two food cost numbers, and the difference between them is where money is made or lost:
- Theoretical food cost — what your recipes and sales mix say you should have spent. It is calculated from costed recipes multiplied by items sold.
- Actual food cost — what you really spent, from purchases and inventory counts.
Mind the gap
If theoretical food cost is 30% but actual is 35%, that 5-point gap is money lost to waste, over-portioning, theft, spoilage or unrecorded comps. On RM1m of food sales that is RM50,000 a year.
Where food cost leaks
- Over-portioning — plates going out heavier than the recipe.
- Waste and spoilage — poor prep, over-ordering, bad rotation.
- Yield loss — trim and shrinkage not accounted for in recipes.
- Receiving errors — paying for product you didn't get.
- Price creep — supplier prices rising without menu reprice.
Bringing food cost back to target
- Re-cost your top 20 selling recipes with current supplier prices.
- Standardise portions and put scales on the line.
- Count high-value inventory weekly.
- Compare theoretical vs actual and chase the biggest variance.
- Reprice or re-engineer dishes below target margin.