What Is Calculating Food Cost?

Calculating food cost just means figuring out how much of your sales is going toward the ingredients you're using. Owners usually do this two ways, for the whole restaurant, and for individual dishes. Both are useful, and honestly, most owners end up doing both at some point.

For the whole restaurant, you're calculating food cost percentage using Cost of Goods Sold divided by Total Food Sales. And COGS itself comes from beginning inventory plus purchases minus ending inventory. That gives you a picture of what you actually used during a stretch of time, not just what got delivered.

For a single dish, it works differently. You add up the cost of every ingredient in that recipe, based on the actual amount used per serving, not the size of the bag it came in. If a burger uses a $2.10 patty, $0.40 of cheese, $0.30 of bun, and so on, you total it up to see what that burger really costs you to make. That's what lets you check whether your menu price actually makes sense.

People usually go looking for how to calculate food cost when something specific is bothering them. Maybe they're pricing a new item. Maybe a supplier just raised prices and they want to know how much that hurts. Maybe costs just feel high, and they want proof one way or the other.

Whatever the reason, calculating food cost regularly, whether that's weekly, monthly, or dish by dish, is what keeps small cost increases from turning into a much bigger problem later.