# food costing....



## fryguy (Sep 2, 2009)

what is the formula you use...and specifically for banquets....also does any one use a spread sheet to conculate and is that a good way to go ....we have a new GM and thing are a bit tighter so I want to make sure we are charging enough. We are a priviate club so they do want a deal but it does need to be fair as it is my food cost ......we do about 1mil. in sales yearly so that our volume if that help any ......help would be great!!

thank

fryguy


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## petemccracken (Sep 18, 2008)

Food cost = the cost of food, what you actually pay for the raw food products. Generally from supplier invoices or purchasing receipts, to the best of my knowledge there is no "formula" for food costs.

Food cost as a percentage of sales (FC/Sales * 100) can be a useful management number. If it is greater than 35% for most operations, suspicions are raised that there may be too much waste or something is going out the back door. Then again, 40% or higher may be normal for that particular business model. There is no magic number to be universally applied.

As a general rule, on average, well run operations can be broken down to:

30-35% Food Cost
30-35% Labor cost
30-35% Overhead cost (rent, insurance, etc.)
0-10% Profit (generally in the neighborhood of 4-6%
The above is AVERAGE! An individual operation may vary widely!

Some, mistakenly IMHO, calculate menu prices by multiplying food cost by a factor between 2.5 to 4.0 (or dividing by .25 to .40, it comes out the same). Unless you have a firm handle on labor and overhead, that is a recipe for one of two results:

Great volume but go out of business because there is not enough money to pay the bills, or
No volume and go out of business because there is not enough money to pay the bills.
Your menu prices must be low enough to attract customers and high enough to cover ALL your expenses.

Your local market will determine what you may charge, and trust me, your customers have no interest in what you pay for food, labor, or overhead. They only care about whether what is on the plate seems to be a good value to them!

Figure out ALL your costs, either on a daily, weekly, monthly, or annual basis.

Divide by the number of seats in your establishment. That will give you a $/seat figure, If you use daily costs, that is the minimum $/seat you must generate to stay in business.

Now you can figure out what meal periods and how many turns per meal period it will take at an average ticket (cover) of $xx (what the local market will bear for each meal period) *to cover your total costs!*

Oh, you were asking for a simple formula, right? Multiply your food cost by three and pray!


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## fryguy (Sep 2, 2009)

thats kinda been whats going on.....the praying part......sometimes it's good to be 2nd in charge. I'm the sous but just trying to help out if I can and thats what I see going on....54% worst food cost ever and i've been there 17 years....chefs a great guy but.....


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## chefdave11 (Oct 27, 2011)

Our process may not apply to your position at all, as we're a new business and you're in an established place, but...I'll share.

This has always been one of the most challenging aspects to our catering business. It's definitely easier now than it was a year ago, but still takes a fair amount of brain power and time when putting together proposals with new items.

While we don't have an exact formula, we do use a combination of the following:

estimated food cost x a minimum of 3, but typically no higher than 4. Although due to market conditions, some will be lower than 3, but they're necessary items and end up as part of a package, so it should balance out.

We will consider labor-intensive items and tack on to cover that. Those are usually higher-end items and I wouldn't be surprised if food cost was in the 12%-20% range for some of those. We use those as an opportunity to make money.

When we've had knowledge of what the market price is, we factor that in, and typically go higher, but not so significantly for standard items that we price ourselves out. *We don't go higher just for the sake of it; our business model has higher costs associated with the higher quality product and overall professionalism that we operate under, which are all distinctly different from our competitors. We do cut pricing on our proposals when we need to, to an extent, so that we don't lose the potential business.

I also spent a fair amount of time online, in the early going, searching for other business's pricing to give a starting point.


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## petemccracken (Sep 18, 2008)

I'd sure be checking trash cans and probably put a video on the back door!

Now, if you are a special place, food costs could be that high, but it would be highly unusual!


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## chefdave11 (Oct 27, 2011)

Sounds like you know what the problems are...and we kindof looking for confirmation from other professionals.

Yeah, 54% is um....unacceptable.  But you knew that, and you likely know where that other 15%-20% is going.


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## berndy (Sep 18, 2010)

_If I ever had a foodcost of_ 54 % I would have been fired on the spot at any place I ever worked. and the owner of the place most likely would have called the police too.


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## someday (Aug 15, 2003)

Wow, 54%...that is horrible. You guys count inventory at the end of every months I assume...right?

Another basic formula would be to take the last months inventory (beginning inventory), add all the month's food purchases, then subtract the ending inventory (current inventory) that you just counted (food cost is generally calculated at the end of the month after inventory). You take that number and divide it by the total food sales for the month. 

This is a basic, general method. It looks like this...BI=beginning inventory, CI=current inventory, P=purchases, and S=sales

(BI+P)-CI / S = FC%

There are other food costs as well, like plate cost and menu food costs, all under the umbrella of "food cost." Figuring out how much food is costing you, plus how much you should charge for it, is very important as well. 

If you know what something costs you, and you know what food cost % you want to run, then you can figure it out very similar to how chef Pete showed you. Something like this:

Cost/FC%=Menu Price

So, if your ribeye steak costs you, say, 5 dollars to put on a plate, and you know you want to run a 35% food cost on it, then:

5/.35=14.29. So you might charge 15$ for it. (this is just an example using made up numbers). 

BUT, there is a lot more to it than that, this is just basic info. Other factors include all the free stuff you give away (bread, amuse bouche, ketchup, butter, etc) and the other stuff on the plate with the steak (potatoes, vegetables, etc). The true way to do it correctly is to figure all this stuff out for all the food you cook and work from that. There are things like q factors, menu mix, and other stuff. 

Some things you can charge more for, some things you can't Making money is about utilizing product in creative ways and being smart with your menu. You have to find balance. Maybe your highest priced menu item you are forced to run close to a 40% food cost on...say a lobster of a filet mignon or something. But, you can balance it out by serving a chicken breast at like 15% food cost. The more of a product you use, the less waste you have, the more money you make. 

Say you get in whole PSMO's. You pay 80$ for it. You get 10 beautiful, 8oz filets out of it. So, essentially, those 10 steaks cost you 8$ each. You charge 28$ for it, basically a 30% FC. You make the portions absorb the cost of the PSMO, so anything else you use from the tenderloin is essentially going to be "free." If you can get some nice trimmings from the PSMO, trim all the sinew and fat, then small dice it and put beef tartare on the app menu for like 11 bucks. You pay a bit for some aioli, some crostini (made with day old bread natch), a bit of shallot, caper, egg, and EVOO. Your cost is very minimal for the tartare, since you aren't "paying" for the beef. 

Obviously, tartare isn't the only thing you could do with PSMO trim, that was just an example. Chickens are another great one...sell the supreme breasts at dinner, fried chicken thighs and drumsticks for lunch, and make stock from the carcass. Stock=soup. I mean, you COULD buy in just chicken breasts, but if you can find outlets for all the trimmings of butchering your own meat, you can save and make a lot of money. 

BUT, yeah, at 54% something is wrong. Your menu pricing is out of whack (you don't charge enough), you guys waste and/or throw away a lot of product, you aren't counting inventory correctly and/or aren't calculating your costs right, or someone is stealing from you....a lot. 

Or, you work at a country club or something, have no budget, and make the members whatever they want, whenever they want.


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## chefedb (Apr 3, 2010)

Slow down everyone..

      The type of operation most often determines food cost. Example there are some upper class country clubs that are 60% however at the end of year members are assesed. So they don't worry about food cost as such. Fast food places are often 27% this is partially to do with what they are selling and the Volume of sales.. Catering only, food cost usually low because of high prices charged. Free standing rest. strives to do 33 to 35 but in many cases hit 40%. this is why it is very important to sell beverages, and why a coke or iced tea is $1.89 to 2.50 and a drink 5.50 to 7.00. Hotel food cost? usually lose money in their restaurants but make it up on banquet sales. So every type operation is different


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## kuan (Jun 11, 2001)

54% is normal for a country club.


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## berndy (Sep 18, 2010)

Most country clubs are not set up to show any profit from food sales like regular restaurants since they goot most of their income from membership fees. I still feel that anything over 40 % is far too high.


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## chefedb (Apr 3, 2010)

Not down here Kuan, we have an exra elite ??clientel


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## chefbuba (Feb 17, 2010)

When I did CC, food cost ran around 50%.......


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## squirrelrj (Feb 18, 2011)

We run around 42% at a CC.


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## broil1 (Jun 30, 2012)

It helps if you have the cooks , portion and follow recipes to the tee. Pre portioning will help your food cost tremendously. And following recipes will eliminate food waste. I run 29% - 31% food cost. I hope it helps. Also double check the cooks when preparing food and make sure they are not wasting food.


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## chefedb (Apr 3, 2010)

Not in a country club you don't.  If you do you are feeding them shredded newspaper


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## chefjustinspyc (Dec 23, 2012)

What was the result of your issue?  I am having a similar one right now...


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## tjsbeer (Nov 4, 2012)

Sorry PeteMcracken but...

"As a general rule, on average, well run operations can be broken down to:

 30-35% Food Cost
 30-35% Labor cost
 30-35% Overhead cost (rent, insurance, etc.)
 0-10% Profit (generally in the neighborhood of 4-6%"

... if your overhead is 30-35% you'll be lucky to tread water and what's the point in that.

Overhead should be in the 20s.


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## samaboud (Feb 15, 2013)

Hi Chefs ...

I am new to this website and the forum....

I am a sous chef and I would like to know more about:

1- The best ways to deal with wastage in kitchen and how to reduce it. 

2- Food costs and calculating it. 

Thanks a lot


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## cookie45133 (Jun 12, 2013)

I work for a small community hospital and I've had to raise my prices to go along with food increase and people are ticked off. I use  30%. The thing is the employees get a 25% discount and there are some days I would like to tell them to go some place else and eat. I charge $2.10 for a 4 Oz double choc  muffin. that we bake. I charge 2.79 for delux hamburger and they get their discount on top of that.

so in other words,lol I dont know the answer either. other than 30%

You can tell I'm rather ticked off today because of their complaining

Does anyone else work for a hospital Cafe that has suggestions??

Cookie


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## petemccracken (Sep 18, 2008)

Cookie,

Let me see if I understand correctly:

You sell a muffin for $2.10 which costs you $0.63 in food cost and employees can buy it for $1.52 ($2.10 - $0.58), for a margin of $0.89

You sell a hamburger for $2.79 which costs you $0.84 in food cost and employees can buy it for $2.09 ($2.79-$0.70), for a margin of $1.25

What I don't see clearly is what is causing you problems?


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## petemccracken (Sep 18, 2008)

SamAboud said:


> Hi Chefs ...
> 
> I am new to this website and the forum....
> 
> ...


Do not throw away salable food! Save what trim you can for stocks, or other uses. Throw away ONLY that which you cannot find a use for in the kitchen


> 2- Food costs and calculating it.


Food costing is straight forward. How much does the food cost that you are putting on the plate. Naturally, that includes what does NOT go on the plate as well.

A simple example, part of the plate is two slices of tomato.

If you can get 8 slices per tomato and a tomato costs $1.00, the food cost per slice is $0.125 or $0.25 per plate. Of course you are throwing away the stem end and the blossom end.

If you sell those two slices of tomato for, say, $1.00, your food cost percentage is $0.25/$1.00 X 100 or 25%

Most people calculate food cost percentage on a weekly or monthly basis rather than by plate and the formulas are:

Food cost = food purchases minus Ending inventory plus Beginning Inventory
Sales = gross sales for the same period as the Food costs
Food Cost percentage of sales = Food Costs/Gross Sales times 100


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## cookie45133 (Jun 12, 2013)

I guess the problem is in the complaining that i'm charging to much for the items. I've costed out the items did what management wanted to raise prices and now I'm the bad guy. which is ok. Yesterday I had guy come into the cafe. almost to the point of yelling at me over the price of that muffin, He was telling me he could buy it at Sam's club for 64 cents, I told him to go ahead buy them at sams bring them from home. problem solved.

I just wanted confirmation that I was doing the right food pricing the correct way.

Thank you for responding.

coookie


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## meezenplaz (Jan 31, 2012)

I've seen this before as well.....people seem to feel perfectly justified in comparing a food service outlet
to a 200,000 square foot retail warehouse enjoying gigantic volume.
Sure I can pay less for a dozen eggs than a restaurant charges for two. But it ain't the same animal at all.
Annoying.


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## linecook854 (Feb 13, 2013)

I hate to hijack fryguy's thread but I have a few similar questions. Just recently a sous (like yesterday recently) so I have zero concept of food costing.

1.) Where does the price of things like paper towels, cleaning chemicals, to-go boxes, cling film, parchment paper, linens etc go? To food costs or overhead? Some things are used by the kitchen staff exclusively like parchment paper but some things are used in various areas of the "house" like cleaning supplies and some things like table linens are used exclusively by FOH. Do you calculate each specific item to each area and how is the gray area (shared items) costed out?

2.) How do you exactly cost out inventory? Do you physically weigh out every single thing in house (spices, salts etc.) to get an exact cost? How can we make inventory more exact without making it an mind-numbing chore?


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## petemccracken (Sep 18, 2008)

linecook854 said:


> 1.) Where does the price of things like paper towels, cleaning chemicals, to-go boxes, cling film, parchment paper, linens etc go? To food costs or overhead? Some things are used by the kitchen staff exclusively like parchment paper but some things are used in various areas of the "house" like cleaning supplies and some things like table linens are used exclusively by FOH. Do you calculate each specific item to each area and how is the gray area (shared items) costed out?


In my establishment, these items are part of overhead even though some may vary with food production quantities. Some will separate the non-production costs, i.e. cleaning supplies, restroom supplies, etc., as overhead and the other food production costs, i.e. cling film, parchment, etc. as part of the "Q" factor for food costing.


> 2.) How do you exactly cost out inventory? Do you physically weigh out every single thing in house (spices, salts etc.) to get an exact cost? How can we make inventory more exact without making it an mind-numbing chore?


These items, along with, often, bread, butter and other condiments, are often calculated as a "Q" factor (see above) which is applied to the recipe cost of specific menu items, generally somewhere in the neighborhood of $0.50-$1.00, depending on the specific operation.

The "Q" factor is an estimate of the average cost, usually per plate or customer, of putting the food on the table, excluding the actual food costs of the plate. In other words, a menu item is costed out as:

Protein recipe PLUS
Vegetable recipe PLUS
Starch recipe PLUS
"Q" factor = Total food cost


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## linecook854 (Feb 13, 2013)

PeteMcCracken said:


> In my establishment, these items are part of overhead even though some may vary with food production quantities. Some will separate the non-production costs, i.e. cleaning supplies, restroom supplies, etc., as overhead and the other food production costs, i.e. cling film, parchment, etc. as part of the "Q" factor for food costing.
> 
> These items, along with, often, bread, butter and other condiments, are often calculated as a "Q" factor (see above) which is applied to the recipe cost of specific menu items, generally somewhere in the neighborhood of $0.50-$1.00, depending on the specific operation.
> 
> ...


Thank you! Just curious, how much does the ''Q'' factor raise in more upscale kitchens? I would assume more goes into "Q" factor at more expensive places (IE serving housemade bread with cultured butter costs more than giving out sysco rolls and bulk butter) than casual places. All of these little things add up when you think about it! You really do get what you pay for!


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## petemccracken (Sep 18, 2008)

It is my understanding that what is in and how large or small the "Q" factor is depends solely on each individual kitchen and chef.

If you do not want to count/weigh it, put it into the "Q" factor


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## cookie45133 (Jun 12, 2013)

I'm glad you asked this question about the Q factor, I found out something new and and now have to go back and look at my numbers. I wasn't adding the condiments.


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## dadodachef12 (Jun 11, 2013)

Pete had a very sound advise and breakdown of food costing. That is fantastic for for any restaurant business operation. However, fryguy's establishment is a private club. It is worthwhile finding out if the operation has to pay for the rent because I once operated and managed food operation for a Yact Club and I did not have to pay rent. So, the arrangement was to price my food cheaper for the members. therefore, my operational cost was only for the food cost and staff wages. I maintained food cost between 50%-60%. My staff wages was 25%-30%. My staff wages was low because I was the chef/operator/manager. So, i made a good living out of it.


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## jjjj (Mar 14, 2015)

I have a question. Labor costs of 35% seems high to me. I know nothing about the business, it just seems high. Could someone break that down for me, hypothetically? Let's say for an average restaurant with a steady business, privately owned. 

Of that 35%, how much would go to the line workers, the managers, the operators? Would the owners pay come out of 'labor', or some other overhead?

And maybe the number of workers vs managers vs anyone above a manager?

Thanks. Just curious.


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## pamgoode (May 8, 2017)

Hello - I've taken over our small family hotel in lovely New Zealand - I'm a producer for photography so ! We've got great pictures ! But my last chef did not keep any records or cost properly ... i have a few questions.
For software looks like kitchen cut yes? It needs to be mac friendly as I am a Mac user
How do I factor in deep frying? I've been costing out a plate of oysters with salad and sauce ... but I see the bills ... gas / changing oil ... is there a simple way to take this into account? 
I have a new chef - what should he be doing?
Wastage book? Stocktake? Finding and using cheapest suppliers? Weekly budget of purchases? Apart from costing and portion control of course 
do you do a cost in expectation of fluctuation in market prices? We are a small community people come for the fish burger and expect it to be the same price ... but it has great cabbage coleslaw with herbs and costs vary in our seasons for cabbage .... so do I pick the highest estimate cost and then know I'm covered when produce is cheaper?? 
People are loving the food / loving the refurbishment / front of house etc .... but .... I'm not making money and food costs are a big part of this.


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## ldiatone (Feb 22, 2016)

fryguy said:


> thats kinda been whats going on.....the praying part......sometimes it's good to be 2nd in charge. I'm the sous but just trying to help out if I can and thats what I see going on....54% worst food cost ever and i've been there 17 years....chefs a great guy but.....


wait 54% in a COUNTRY CLUB happens.Why? cause all members want there food at a discount. they pay dues so they want it at a lower price then the menu. my food costs were all around 42-52%. keep in mind clubs are non profit. parties and weddings balance costs out. but how many weddings does a club do in feb-dec-nov. not many compared to may through sept. in our golf invational the members did not want to pay a "price" for the 3 day event. they wanted the COST of the food and labor. so there was no sale. reason ? they figured that the golf course would loose 200 rounds of greens fees cause the course is tied up. another reason FC can b high? would you chefs want to serve a lesser product to your customers or members? they pay dues and want a better product ok i sold chicken wing for 6.95 for 6. the members came to me and stated "Well down the street this bar is selling order of 8 wings for 4.95, the club should also" what to do there the boss. are you going to serve grade good meat and charge prime prices. How about using turkey or pork cutlets for veal? anyone do that? it would lower the food cost all right. i had to have on my menu 9.95 specials every night. and guess what the members ate the most of. some were golfers, some were early birds. lets not forger spaghetti night 5.95. fine all would b happy selling 100 or 150. lucky to serve 80 covers all night. and at the same time you have to have the main menu items for the members that bring there guests out for a 3 star meal. and dont get me started on the different buffets for easter mothers day christmas lunches etc. tell me buffets don't have a high cost!

ldiat


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## ldiatone (Feb 22, 2016)

let me add one more thing.  this happens 2 time  month from may to oct.  ladies golf outting.  they have a budget. a % for food-gifts and prizes.  9.95 per person for food.  1 starter  hot or cold entree' and a dessert.  no ice cream.   did i forget to mention the snacks on the turn?

cheese and crackers--pate--ham-chicken-tuna salad.  oh included in the 9.95 price.  dont repeat the snacks in the entree'  go ahead give out some suggestions?

ldieaone


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