Food Costing - Everything You Need To Know About Food Cost
Author: Chef George Krumov
Food cost and labour cost are the two major aspects that can make or brake a restaurant. While labour cost is relatively easy to control, it is often not the case with food cost. When opening a new restaurant, the fun part ends with the creation of your menu and the real work begins with the food costing. You can use industry standards if you want to, but the most important thing is to create products with a low cost and high perception of value.
Usually the industry standard for food cost is 30-35% for the entire menu. However, there are some exceptions. For example if you are opening a sushi bar, you should strive to achieve 22-25% food cost, because otherwise, with prices such as $7 for a sushi roll, there won't be almost anything left for you after you pay your staff and all the bills.
Costing your menu starts from your food suppliers. A good food supplier should be able to tell you, for example, how much is the cost of a single 6 oz. chicken breast from a 4 kg. case. If they don't know (think if you want to deal with a company like that), simply count how many are in a case and divide this number to the price. When you cost all the ingredients you will use for the entire recipe, add them up. Make sure you include table condiments, napkins and add 2% for food wastage. If the final amount is for example $6, divide 6/.30=$20 menu price for this item. If you divide 6/.33=$18. In the first example your food cost is 30% and 33% in the second. For some higher end menu items, such as filet mignon dinner or lobster tail, you can go to 40% food cost, because these items bring better margin to your bottom line.
For example, if your filet mignon dinner cost you $10 including sauce, potato and vegetables, you can sell it for $25 instead of $30. It still brings $15, which is better that a chicken parmesan dinner that costs $6 and sells for $15-16. Likewise, you should price pasta meals at no more than 28%.
It may seem that you are making a lot of money, but unfortunately this is not the case. Keep in mind that you aren't just paying for the food itself. You are paying someone to prepare the food, serve the food, wash the dishes and even to some company to wash your table covers.. Everything in your restaurant, from payroll to the electric bill needs to be covered by the food you serve, and this is even before you cover your capital investment and pay yourself.
Since prices for your food supplies fluctuate, keep the menu cards with your food costing for your record. You may need to adjust your serving sizes or your prices sometime in the future. This is only if prices go up, which is of course the case most of the time. If you find a cheaper product with the same quality down the road, you don't have to reduce prices.
To really understand what your real food cost is you should keep truck of what you have sold and each item's contribution to your bottom line. This requires measuring your sales against the cost of your supplies about once a month. It is also very important to implement proper portion control and minimizing wastage.
Reducing food cost:
If your calculations and your real food cost don't match, than you should pay special attention to portion control and wastage. You can print a monthly wastage sheet and stick it to your fridge door for the staff to record any wastage. For example, if two iceberg lettuces go bad and have to be thrown away, the cooks must record it for the day. It may not seem much today, but at the end of the month it accumulates and may be even more than the two percent that you added to your food cost as wastage. And also, when you calculate your food cost, don't forget to take into account any free or subsidized meals that you might be providing for the staff.
Example of a menu card for the food cost of an item:
California Roll: seaweed sheet, rice, avocado, crab stick, cucumber.
½ seaweed sheet = $ 0.06 (100 sheets = $ 12.99)
rice = $ 0.10 (1 kg rice cost $2 and makes 20 sushi rolls)
avocado = $ 0.13 (1 avocado cost $0.79 and makes 6 sushi rolls)
crab stick = $ 0.22 (1 package of 32 sticks cost $6.99)
cucumber = $ 0.10 (1 cucumber cost $1 and makes 10 sushi rolls)
rice seasoning = $ 0.05 (a small amount of rice vinegar and sugar)
chop sticks = $ 0.10
Napkin = $ 0.03
Soy sauce = $ 0.15
Sweet sesame-ginger dipping sauce = $ 0.30 (for 2 oz.)
Wasabi = $ 0.02 (1 kg wasabi powder cost $12 and makes about 3kg wasabi - enough for 1 month)
pickled ginger = $ 0.08 (1 jar of pickled ginger cost $1.99 and makes at least 25 servings)
dishwashing liquid = $ 0.01
Food cost = $ 1.35
Selling price = $ 6.98
Item cost % = 19 % + 2% wastage
Total Food Cost = 21%
If you have any questions regarding food costing, do not hesitate to contact me. You can find the contact link at the bottom of this page. Good luck. Click on the link to read my blog post How To Do Food Costing 101 for more details on the topic.