Apicbase Glossary

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food and beverage industry glossary


Food cost percentage

Food Cost Percentage is an important metric for restaurants to measure how profitable their operations are. It represents the ratio of ingredients used to generate revenue divided as a percentage. Generally, a restaurant’s Food Cost Percentage should be between 28 and 35% of its total revenue in order to remain profitable. To calculate this number, divide the actual cost of food (the overall decrease in stock over a particular time period) by the total revenue earned during that same timeframe. This figure can then be used to make informed decisions about menus, pricing, and inventory management in order to maximize profits while making sure the quality of food remains high. Furthermore, tracking Food Cost Percentage can help restaurants identify trends and areas of improvement where they can increase their margins and make more money. ​​​​​

If your business’s food cost percentage is low, there are a few steps you can take to improve it:

1. Analyze your menu items and identify opportunities for improvement. Examine current recipes and pricing, and make adjustments where necessary. Consider removing some items that are no longer in demand or don’t bring in enough profit.

2. Monitor your inventory closely and track all food purchases. Invest in a good inventory management system to make it easier to keep track of what you have on hand and when items need to be reordered.

3. Utilize ingredients that are in season or found locally, as these tend to be more cost-effective than imported items. Similarly, look for bulk discounts when purchasing ingredients in larger quantities.

4. Negotiate with suppliers to get the best possible prices on food products and supplies. Consider switching vendors if you find a better deal elsewhere.

5. Evaluate your portion sizes and adjust them accordingly to reduce waste and improve cost efficiency.

6. Use leftovers wisely and create new dishes from them to increase your menu offerings without increasing food costs.

7. Train staff on proper portion control and ingredient usage to ensure that all food is prepared according to recipes, eliminating waste or overuse of ingredients.

By following these steps, you can reduce food costs and improve the profitability of your business. With careful planning and management, you can successfully increase your business’s food cost percentage.

A food cost percentage is one of various indicator of the financial health and efficiency of a F&B establishment. It is an important tool that allows a business to monitor and control their food costs, while still maintaining high-quality standards for the customer. By calculating the percentage, it helps to identify areas where savings may be made or price increases may be justified. It can also be used to compare food costs against average industry benchmarks, and determine whether changes are necessary to remain competitive. Additionally, tracking the food cost percentage over time will allow a business to evaluate their purchasing decisions and work out ways to reduce expenses without compromising on quality or value. Ultimately, understanding and controlling the food cost percentage is essential for any F&B establishment that wishes to remain profitable while catering to the desires of clients.

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