What Is Food Cost?

If you run a restaurant, food cost is a term you've probably heard a hundred times, but here's what it actually means, it's the money that goes into the ingredients behind every dish you sell. Your proteins, produce, dairy, spices, and yes, even those to-go containers you're using more of than ever.

Here's where it gets useful, though. Nobody in this business just looks at "I spent $3,000 on food this week" and calls it a day. You want to know what that spending looks like next to your sales. So if that $3,000 in ingredients turned into $10,000 in food sales, you're sitting at a 30 percent food cost. That's the number worth tracking, because it holds up whether last week was slow or slammed, and it's the number you can actually put next to another restaurant's and learn something from.

Don't expect one ideal percentage to apply across the board, though. Steak costs more than flour and cheese, so a steakhouse is naturally going to run hotter on food cost than your neighborhood pizza place. Most full-service spots fall somewhere between 28 and 35 percent, but where you land depends on your menu, your pricing, and honestly, your own restaurant's history matters more than any industry average.

Keeping track of food cost regularly helps owners catch these problems early and keep their pricing and profits on track.