What is food cost percentage?

The answer

Food cost percentage is the share of a dish's price, or of a restaurant's food sales, that is spent on ingredients. Divide the ingredient cost by the selling price (before GST) and multiply by 100: a dish that costs ₹90 to make and sells for ₹300 has a 30% food cost.

Food cost percentage tells you how much of every ₹100 a guest spends goes on the ingredients. It is the most common way restaurants check whether recipes, purchasing and portions are under control.

The formula

You can work it out for one dish or for the whole kitchen over a period.

Use menu prices before GST. GST collected on a bill is not your income, so including it makes the percentage look lower than it is.

A worked example

A plate of chole bhature uses ₹90 of ingredients at today's prices and sells for ₹300.

• Food cost % = ₹90 ÷ ₹300 × 100 = 30%
• Gross profit per plate = ₹300 − ₹90 = ₹210

If you want a 28% food cost instead, divide the cost by the target: ₹90 ÷ 0.28 = ₹321.43, which you might round to ₹325.

For a whole month, suppose opening stock was ₹40,000, purchases were ₹1,80,000 and closing stock is ₹35,000. Ingredients used = ₹1,85,000. With food sales of ₹6,00,000, the actual food cost is ₹1,85,000 ÷ ₹6,00,000 = 30.8%.

Recipe cost vs actual cost

The dish formula gives the recipe (theoretical) food cost: what the food should cost if every portion matches the recipe. The period formula gives the actual food cost: what the kitchen really used. Actual is almost always a little higher, because of waste, over-portioning, staff meals and loss. Watching the gap between the two each week is one of the most useful checks a restaurant can make; restaurant inventory management explains how.

What it does not tell you

Food cost percentage measures one cost against sales. It is not profit. A 30% food cost leaves 70% of the price to pay staff, rent, gas, power and packaging before anything is left over. Our guide to food cost percentage vs profit margin shows how the two connect.

There is also no single correct target. It depends on your cuisine, format, rent and prices. A dish with a higher percentage can still earn more rupees per plate than a cheap one with a low percentage.

Common mistakes

• Costing recipes once and never again. When key ingredient prices change, recost the dishes that use them.
• Leaving out small items. Oil, spices, garnish and the chutney on the side all count.
• Including GST in the price. Use prices before GST.
• Forgetting packaging on delivery dishes. It is not food, but it belongs in the price. The menu price calculator adds it for you.

To check your own dishes, use the food cost calculator, or see the glossary entry for a short definition.

Related questions

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General information, not legal, tax or financial advice. Published by Chameron Digital.