# food cost what is it and how do you figure it?



## donna phillips

I am at a loss at what food cost really is and how you figure it I have drawn a blank and can't seem to find the answer can anyone give me the right answer.


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## pete

Food cost is how much a dish (or plate of food) costs you to produce, in terms of what the products cost. You then divide the cost by what you are selling it for to get your Food Cost %. Let me show you an example. Let's look at a filet mignon that you might get at a typical restaurant:
8oz. Filet (at $15 a pound) $7.50
Sauce $.50
Mashed Potatoes $.50
Vegetable $.35
Total cost of product =$8.85
It costs you $8.85 to put the food onto that plate. That is your food cost.

Selling price on menu $24.00
Your food cost % =36.88% (8.85 divided by 24 =.3688 or 36.88%)


It can get a little more complicated than that, but this is the basics of food cost.


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## nowiamone

There are a lot of forms out there yu can use but you still have to understand the process. Take the cost of a product and divide it by the number of portions you will make from the item. Do this for each item individually. I've made up the prices and the portion numbers in these examples.

Package of burgers cost 16.00 there are 24 servings in each package.(16.00 divided by 24 = cost)
Buns 2.50; 12 servings(2.50 divided by 12= cost)

There are some estimates, items you may want to factor differantly: 
Iceberg lettuce 16-18 servings (1.60 by 16, leave yourself a cushion, use the low number of portions) 

Tomatos 6-10 servings each, but you are paying $2.00 lb. but you are getting 6 toms per lb. so divide the 2.00 by 6 each then divide by any average number of slices you'll get, I'd use the number 8. 

You'll have some items that you make an educated guess on. Ketchup, pickles, etc. You can estimate an amount for that or find a barometer to gauge everything by. Such as count the buns packages you go through for a few days, make a mark when your #10 can of ketch is gone; make another mark when the pickles are gone, etc. Then you can check your use againest the estimate you made. (if you make 70 burgers with one gallon of pickles & the pickle cost is $6.30 for a gallon divide by 70 servings; but you served 50 burgers to the #10 can of ketchup. Take the cost of the ketchup and divide by 50 burgers )

You'll get a feel for costing your items and verifing. We always seem to have one menu item that I'm verifying my cost/usage on. Prepping the salad greens, counting the plates used for the evening. The quantity of fries I put on a steak plate are differant than a Burger, so I can't assume that the cost is the same on the fries for both dishes.

I like to keep a page per menu item, and have my calculations clearly labled. So if one items goes up in cost I can go in and revamp a number easily. 

I like to factor my base operating costs with my food also. for example, I use $400. nat. gas a month so I divide it into a per day cost. And I look at it that way as I have to have the stove and grill on everyday and ready. But if I'm doing a 100 meals a day my cost for gas is less per plate, than if I'm doing 50 meals a day. Also keep in mind an average for the week, as 3 days maybe less than 100; but 4 days maybe 200+. These numbers are usful to me as I can tighten my costs some, and makes me aware that in my slow winter months my daily operating costs are considerably higher and therefore it costs more for me to produce a plate.


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## warchef

those are both methods for cost regarding menues.. or specials.. 

to track your true effectiveness take your weekly sales and devide into that what you spent on food that week or month.. 

say you spent 500 in food.. and your sales were 2000... 

you would devide 2000 into 500 to come out with .25 or 25 %

now you also cant use that as the accurate number.. you must take into account your inhouse items.. this is where inventories come into play... 

haveing 1000 inventory one month then having 4000 the next month there is 3k tied up in inventory that will indeed have an effect on your monthly numbers.. 

all in all it comes down to what ever scheme your employer/owner wants you to use.. ive seen guys do it per plate.. if seen guys track it weekly.. or monthly.. 

when you do it by plate you end up with 50 dollar steaks and 5 dollar pastas.. but belive it or not some folks like to do it that way..


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## pete

Warchef, you should always cost out each and every plate. That way you can look at your mix and see where a problem lies. When you cost out plates you have to make allowances. Of course you aren't going to sell a steak at $50 to make it come in at your projected food cost. But if your steak is going to have a 45% food cost at $29 then you need to serve a chicken or pasta dish at a 19-20% food cost to even it out. Of course your true food cost comes at the end of the month when you do inventory, but costing your menu out plate by plate just gives you another tool by which you can watch your food cost and troubleshoot when there is problems.


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## chef kaiser

hi, 

agree with Pete, the food cost is nothing else, then the money you have to pay to the supplier, that is the reason why recipes are the most fundamental tools in any operation. I call them the heart of the F&B opertation. That is the reason why in a traditional P&L of Condrad Hilton, he clearly stated following procedure. 


Food Revenue 

- Food cost to suppliers

- Food tranfers charged to other profit centers or admin 

- spoilages (not in control by the chef) 

= Gross Operating Food Profit 

yes as Pete stateted it, it can get more complicated, however the recipe and it to be costed right is the most important. 

regards 

PS: Well Conrad Hilton i did shortcut a little, he was fare more specific with the way his P&L should look like in his manuals from the purchasing - to the receiving - to the storeroom - production - cost control - service - and happy customers - and final accounting responsibilities of the chef too.


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## chef kaiser

Hi, 

well a subject i love alot, as since the age of 23, i was exposed to that, when i joined the Hilton Chain in Brussels. It actually could be a nice subject on this site, as long people respect each other and age would not be a point of view. 

To tell you a story, i was a trainee in that time and my GM was a former cook, he told me straight he told me right, what Hilton International means. 

Conrad Hilton for myself today is one of the greatest Hotel Personalities in the world. Well i do not right that to gain the Heart of April on this site as he or she is critizising more then teaching. Just to be said. 

Conrad Hilton had style, respect and understanding to workers, that is the way he build his hotels. Well i believe in an other American Mr. Ford and many more i do and i do believe in. 

Well i just wanted to say nice subject, which truley could help many today in this financial delema of being a Chef. 

regards


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## pete

At one of the restaurants I worked at this is how we arrived at our month end food cost:

Opening inventory
+Purchases
-Transfers to the bar
+Transfers from the bar
-Transfers to other outlets
+Transfers from other outlets
-Cost of family meal (we got credit for it)
-Cost of Comps (again we got credit)
-Spoilage (never really used this, we just sucked it up)
-Ending Inventory
=Cost of goods sold

/Food Sales for the Month
=Food Cost %


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## chef kaiser

Pete, 

you know the point and for me no point to argue, it is more for me on this site, were we should be professionals and you get answers of people, first questioning your age, and after that they think. Food cost control as you did put it more specific right now is clear too me. i just felt to start the discussion with Conrad Hilton and i truley respect him. 

regards


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## kuan

Pete, did you actually get the total cost of food for the family meal? Some places do as a percentage of labor hours. One place I worked we got $0.15 per hour worked. Of course we always have leftovers, and I always said that the $0.15 was never enough. We had so many part time employees in housekeeping. They would work 4 hours and eat lunch.


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## pete

Family meal was free to all employees. The company would reimburse me for the cost of the goods to make family meal. I would just keep track all month long then submit an "invoice". I would also add to that foods that the cooks ate. The cost was really up to me. They never said anything unless it ever seemed high.


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## blade55440

The one thing I probably couldn't stress enough when figuring food cost...*DON'T FORGET TO ADJUST INGREDIENT PRICES TO ACCOUNT FOR WASTE/TRIM!!!*


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## david jones

Okay Donna, do you hate us all now??

Here's what your accountant would want at the end of the month:

Last Months Ending Inventory ($)

Purchases ($)

End of Month Inventory ($)

If you take Last Month + Purchases - End of Month = Usage

Take Usage divided by Food Revenue from your POS = Food Cost %

Do that two months in a row and then we'll go to the next level.


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## gordonkingsley

so Pete my question is this if my plated dinner cost me $6.50 and want to run a 30% food cost would i times my $6.50 by .30


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## cheflayne

divide by .3

$6.50 divided by .3= $21.70


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## petemccracken

gordonkingsley said:


> so Pete my question is this if my plated dinner cost me $6.50 and want to run a 30% food cost would i times my $6.50 by .30


If I understand you correctly, the food cost for your plated dinner is $6.50 and you want a menu price to maintain a 30% food cost?

If so, DIVIDE your food cost by the desired food cost percentage, i.e. $6.50/0.30 = $21.67

Otherwise, if your menu price is $6.50, multiplying by the food cost percentage will give you your maximum food cost for the plate, i.e. $6.50 * 0.30 = $1.95

Using food cost percentage to arrive at a menu price is, IMHO, a flawed method that may lead to disastrous consequences. Food cost percentage is a *management tool* to identify potential problems.

Menu prices must be *high enough* to generate income to pay for:

Food
Labor
Overhead
and must be *low enough *to attract customers willing to pay.

Food and labor costs vary directly with the number of covers *sold.* Overhead, in $/cover, varies inversely with the number of covers sold, i.e., the more covers you sell, the less $$/cover is needed to offset overhead.

A very rough example:

20 seat restaurant, open 7 days per week, dinner only.

Rent, utilities, insurance, licenses, etc. total, um, $2,500/month, averages $83.33/day ($2,500/30 days)

Labor (average) $12/hour, 8 hours/day, dishwasher, cook, server = $200/day plus $40 payroll burdens = $240, use $250/day

Competition charges, on average, $19.95 per cover.

To cover labor and overhead, you must gross a minimum of $333.33/day, that's $16.67 per seat ($333.33/20 seats). That is the *base* without any food cost.

Your base per cover is:

Single turn (20 covers) $16.67 ($333.33/20)
1 1/2 turns (30 covers) $11.11 ($333.33/30)
2 turns (40 covers) $8.33 ($333.33/40)

If you meet the competitive price of $19.95, your food cost margin is:

Single turn (20 covers) $3.28 ($19.95 - $16.67) or a food cost percentage of 16.44% ($3.28/$19.95 * 100)
1 1/2 turns (30 covers) $8.84 ($19.95 - $11.11) or a food cost percentage of 44.31% ($8.84/$19.95 * 100)
2 turns (40 covers) $11.62 ($19.95 - $8.33) or a food cost percentage of 58.25% ($11.62/$19.95 * 100)
As you can see, a tolerable food cost percentage varies with the volume of business and thus is a poor guide to setting prices. At your target of a 30% food cost, $19.95 * 0.30 = 5.99, you will have $13.96 per cover to meet your overhead and labor costs. That means you will have to average 24 covers per day to stay in business, a pretty reasonable goal.

If your food cost percentage creeps up to, say, 35% (from $5.99 to $6.98), your overhead and labor margin drops to $12.97/cover and now you need 26 covers per day average, that's only two more covers each day or an 8.33% increase in daily sales.

A long way to simply point out to not misuse guidelines and do not mistake management tools for marketing tools.


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## wvman2374

You're looking for the cost of ingredients/product that goes into putting a dish in front of the customer.  This should include every little bit of product used in the creation of that dish.

As was said you have to keep track of trim and waste to get an accurate number.

Theres other factors to consider as well.

Yield is a big one.  This can include trim and waste but also reduction in weight/volume during the cooking process.

For instance, say you are going to serve 8 oz portions of pulled pork, made from smoking pork butts.  Your butts may be 10 pounds before cooking, but after cooking and removing the bones you might get 6 pounds of actual pulled product from each butt, due to loss of fat and moisture during the long cooking process, giving a 60% yield.  So if you paid $3/lb for your pork butt, it actually costs you $5/lb to produce the pulled pork.  (10lbs @ $3/lb is $30;  $30 divided by 6 lbs is $5/lb)  So your 8 oz portions cost $2.50 to produce.  If you just used the purchase price you'd get the erroneous result of $1.50 per portion.

This would also apply to large batches of sauces or anything else that is going to have some significant volume or weight loss during cooking.  i.e. if you are reducing a sauce to 1/2 original size, you've essentially doubled the portion cost of that product.

You should also try to account for things like fryer oil used for making french fries or other fried foods (weekly averages is the best way I know of to account for this), salt and pepper as seasonings, garnishes, etc..


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## petemccracken

wvman2374 raises an important point, be careful as to _when_ you calculate portion costs.

Using the pork butt as an example (ignoring everything else except the pork:

10 lb pork butt @ $3.00/lb = $30 (AP)
6 lb yield of boneless pulled pork (EP) = 96 ounces, @ 2 oz/serving = 48 servings
$30 (AP) / 48 servings (EP)= $0.625/serving
That is the same as saying that the cooked, boneless, pulled pork cost $5/lb (EP) and serves 8 for a portion cost of $0.625/serving ($5/8 servings)

For me, the easy way is to total up ALL of the AP costs and divide by the final # of servings (EP) to get the $/serving

Others may find it easier to convert the AP costs to EP costs prior to dividing by the # of servings


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## pezza

I use 70% - 75% gross profit margin depending on the product. It's my standard and works for me. I will be flexible to a point but will try to add value in other ways if the competition is being stupid. If I can't make the numbers work on a spreadsheet or, it's too time consuming to produce, I'll find a better product to suit my bar.

What I am concerned about above is that nobody has mentioned taxes. If you're paying 21% VAT (IVA) that needs to be taken into consideration,otherwise it comes straight out of your pocket. We also have to pay 12% National Insurance to the government for the privilege of hiring an employee - where does that money come from? All taxes need to be paid and it needs to be taken into account always.

wvman2374 also makes a good point and is why "cost of plate" should be a benchmark.


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