How to calculate food cost percentage, and what to do with it
The formula, a worked example, and how to read the gap between what you should have used and what you did.
Food cost percentage is the share of your food sales that went on the ingredients behind them. It is the single number most restaurant owners watch, because small changes in it decide whether an outlet makes money.
The formula
Food cost % = cost of food used ÷ food sales × 100
The cost of food used for a period is not what you bought. It is what you used:
Cost of food used = opening stock + purchases − closing stock
Use the same period for every part: a week or a month, from one stock count to the next.
A worked example
An outlet runs a monthly count. These figures are an example, not a benchmark.
| Line | Amount |
|---|---|
| Opening stock (1 Sep count) | ₹1,20,000 |
| Purchases in September | ₹4,80,000 |
| Closing stock (1 Oct count) | ₹1,10,000 |
| Cost of food used | ₹4,90,000 |
| Food sales in September | ₹15,00,000 |
| Food cost % | 32.7% |
₹1,20,000 + ₹4,80,000 − ₹1,10,000 = ₹4,90,000, and ₹4,90,000 ÷ ₹15,00,000 = 32.7%.
Two things to get right:
- Count the same way every time. The closing count of one period is the opening count of the next. If one count includes the walk-in freezer and the next does not, the percentage moves for no real reason.
- Include transfers. In a chain, stock sent from the central kitchen to an outlet is a purchase for the outlet and a reduction for the kitchen. Leave it out and one looks too good and the other too bad.
Actual and theoretical food cost
The figure above is actual food cost: what really left your stock. The other half of the picture is theoretical food cost: what you should have used, given what you sold and your recipes.
If the outlet sold 1,000 plates of a biryani whose recipe uses 150 g of rice, it should have used 150 kg of rice for that dish. Add that up across the menu, price it, and you have theoretical food cost.
The gap between actual and theoretical is where the money goes. A gap of a point or two is normal. A wide or growing gap means food is leaving the kitchen without becoming sales.
Where the gap usually comes from
- Waste: spoilage, expired stock, overproduction and dropped plates. Record disposals with a reason so you can see which.
- Portioning: a generous hand on expensive ingredients. Check yields on the dishes that matter most.
- Receiving: paying for 20 kg and receiving 18. Weigh and count deliveries against the order.
- Price drift: suppliers billing above the agreed price. Check invoices against contracts.
- Transfers: stock sent but not all received. Confirm every transfer at the receiving end.
- Theft: less common than the others, and best shown by evidence, not assumed.
How often to calculate it
Monthly is the minimum. Weekly is better for chains, because a problem found after a week costs a quarter of one found after a month. Weekly figures need a weekly count of at least your high-value items.
How Buddhi helps
Buddhi records every receipt, transfer, production run, disposal and count as a stock movement, so opening and closing stock and the cost of food used come from the system rather than a spreadsheet. Production records yield against recipes, invoices are checked against contract prices, and ChainGuard points out patterns such as repeated transfer shortages or unusual waste for an owner to look at.