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Ideal or Real Food Cost in the Restaurant Business

Today, most culinary schools still teach their students how to calculate the wrong food cost. Sure, the math is right, but the dollars at stake hurt our restaurants’ bottom line. The problem comes from the separation of percentage points and dollars.

Banks use dollars, not percentage points


One thing I’m sure of is that banks don’t accept percentage points as deposits, trust me, I tried! For some reason the cashier just looked at me dumbfounded and then laughed. In fact, she had so much fun that she pointed to the cashier next to her who responded in much the same way. I found no humor in it because I had bills to pay, products to buy, and employees who wanted their money too. To rectify the situation, I gave in to the pressure and wrote up a revised deposit slip using the required dollar standard.

So if you can’t deposit percentage points, why do most restaurants use this as their primary goal? Shouldn’t institutions focus on dollars instead? Your damn right they should.

Higher food cost doesn’t mean theft or waste


It’s the end of your period and the accountant has just brought the p&l. A quick scan shows that your food cost is 35%. What! The first thought that crosses the minds of most operators and managers is that we have a flight or product waste problem. Well, that might be true, but before you run up to the staff and start ranting and raging, you need to know if it’s the truth. You might very well have to eat those words after reading this article. In fact, they may need to be rented instead.

So what is the ideal food cost?


Well, let’s take a look at what the real food cost value is and how it is divided. To calculate the true cost of food, you take the cost of the product you need to produce the food and divide it by the turnover of that food. You can calculate food cost for an individual plate or over a specific period of time. For example, if it costs you $3.50 for the product and you sell the item for $12.00, your food cost is $3.50/$12.00 = 0.2916 or 29.16%

29% food cost is awesome


Yes, 29% of food cost is not bad, but is it the best thing for the restaurant? Let’s take a look at an example of a full-service restaurant. Looking at some of their menu selections, we have a chicken dish that is on the menu for $15.00, a steak for $19.00, and a steak and lobster dish for $28.00. When looking at cost, chicken is $4.00, steak $7.00, and steak and lobster $12.00. We calculate our food costs on these to offer the chicken dish at 27%, the steak at 37% and the steak and lobster at 43%.

It’s pretty clear, if you want to run below that magic 30% food cost figure, ell chicken! But, like I said when we started, the bank doesn’t like percentages on deposit slips, so convert them to dollars. Ok, since they sold a chicken dish for $15.00 and it cost them $4.00, that’s easy, $15.00 – $4.00 = $11.00. Are they happy now? They have their food cost down 27% and cashed out $11.00. Everything is fine until someone tells them their mistake. Sure, they ran a good food cost, but they could have taken more money. How? By selling one of the other dishes. The steak, which cost them $7.00 to produce and sold for $19.00, would have made them $12.00 and the steak and lobster would have made $16.00.

If it was me going to the bank to make the deposit I would much rather deposit $16.00 for steak and lobster than $11.00 for chicken and take the associated 43% food cost with a smile. So the next time your actual food cost numbers come in, run your ideal food cost numbers to compare before you fly off with your staff. The difference between your actual and actual food costs is where associated issues can be found with regards to product theft or wastage issues.

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