Restaurant Food Costing

Typically, food costs should account for around 1/3 of a restaurant’s expenses. The food cost along with labor and overhead costs should account for more than 2/3 of the total expenses. Above that is the profit the restaurant will generate. Since food costs are one of the highest expenses for a restaurant, food costing is viewed as one of the best ways to increase profitability for a restaurant who needs to generate more profits to stay in business.

There are a number of ways you can analyze and optimize your food costs. First, you can do this manually, by thoroughly analyzing your food costs during a set period of time, usually a period of several weeks or a month. Your statistics should then be analyzed against restaurant industry average food costs to try and pinpoint areas of expense where your restaurant can improve. Remember that all beverages should also be included in your food cost analysis. From there, you should have a detailed report of all food purchases that were made in your restaurant during the reporting period. You can then compare this to your food inventory costs for the same period. You’ll be able to calculate your total food cost and be able to make adjustments for inventory and food costs. For an even more accurate analysis, try to conduct your reporting period over a longer period of time. This will allow you to further reduce costs and maximize inventory and overall profits.

Another way to calculate and optimize food costs is to use software. There are food costing systems, as well as full scale restaurant inventory and management software packages that include extensive food costing analysis and reporting. The reporting and calculation is automatically done for you as inventory and sales are calculated. Cost Genie is one of the leading software packages for this task and it’s available at

Once you have analyzed your food costs and inventory, whether manually or via a software package like Cost Genie, you can make adjustments to your business, including standardizing your recipes, evaluating your purchases, minimizing spoilage and taking steps to streamline your entire inventory and sales process.

The bottom line is that proper and detailed food costing for your restaurant means increased profits and restaurant success.

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