How to work out food cost percentage
Food cost percentage is one division. The hard part is knowing what to put on each side of it — and most of the arguments about whether a dish is profitable are really arguments about that.
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The formula
Food cost percentage is what the ingredients cost, divided by what you sell the dish for. Multiply by 100 to read it as a percentage.
The number people quote for a menu as a whole is the same sum with the month's total food spend on top and the month's total food sales underneath. Both are useful and they answer different questions — the dish tells you what to change, the month tells you whether it worked.
- Per dish: ingredient cost ÷ sell price × 100.
- Per month: total food cost ÷ total food sales × 100.
- Beginning inventory + purchases − ending inventory is what you actually used, which is not the same as what you bought. This is where a stocktake earns its keep.
A worked example
A burger. Every line is the cost of the amount you use, not the price of the pack it came in — that conversion is the step people skip, and it is the one that makes the answer wrong.
| Item | Pack | Used | Cost |
|---|---|---|---|
| Beef patty | $48.00 / 24 | 1 | $2.00 |
| Bun | $9.60 / 12 | 1 | $0.80 |
| Cheese | $18.00 / 1kg | 40g | $0.72 |
| Salad, sauce, pickle | — | — | $0.95 |
| Chips | $16.00 / 4kg | 180g | $0.72 |
| Ingredient cost | $5.19 | ||
| Sell price (ex GST) | $18.00 | ||
| Food cost | 28.8% |
What number should you be aiming at?
There is no legal or standard figure and anyone quoting one as a rule is guessing at your rent. What is true is the shape of it: a place with high labour and high rent needs a lower food cost to survive than a place with neither.
The useful comparison is not against an industry number, it is against your own last month. A dish that has drifted from 29% to 36% is telling you something specific and recent, and that is actionable in a way that a benchmark never is.
The four things that quietly push it up
A costing done once and never revisited is a costing that is wrong, because none of these hold still.
- Supplier price rises. Nobody rings to tell you. The invoice arrives and the dish is less profitable than it was on Monday.
- Portion drift. The same recipe, plated by three people, three different weights. This is the biggest one and the least discussed.
- Waste and trim. If you cost a whole fillet and serve two thirds of it, the third you trimmed off is part of the cost of the two thirds you sold.
- Comps and staff meals. Real food, real money, and usually missing from the spreadsheet entirely.
Cost ex GST, sell ex GST
Keep both sides of the division on the same basis. If you are registered for 10% GST you claim the GST back on what you buy, so the true ingredient cost is the GST-exclusive one — and the sell price you compare it against should be GST-exclusive too.
Mixing them is a common and expensive mistake: an ingredient cost including GST against a sell price excluding it makes every dish look worse than it is, and can talk you into putting prices up you did not need to touch.
Or let Cost Builder do it
Cost Builder does this from the pack price up — 180g out of a 5kg bag is worked out for you, the margin sits next to the sell price, and you can reopen the costing when the supplier puts prices up. Free on every plan.
Questions
- What is a good food cost percentage?
- There is no single correct figure — it depends on your rent, your labour and what you are selling. The more useful test is the direction of travel: compare a dish against your own costing from last quarter rather than against a number from the internet.
- How do I work out the cost of one portion from a bulk pack?
- Divide the pack price by the amount in the pack to get a per-unit cost, then multiply by the amount you use. A $18 kilo of cheese is $0.018 per gram, so 40g costs $0.72.
- Should I include GST in the ingredient cost?
- If you are registered for GST, no — you claim it back, so use the GST-exclusive cost and compare it against a GST-exclusive sell price. What matters is that both sides of the sum are on the same basis.
- Why is my actual food cost higher than my costed one?
- Almost always portion drift, waste and trim, comps and staff meals, or a supplier price rise you have not re-costed for. A stocktake at both ends of the period shows you what was really used, as opposed to what the recipes say should have been.