Industry News
Understanding & Calculating Restaurant Food Costs
Whether you are opening a new restaurant or revamping your current menu, crafting unique dishes and pricing your meals correctly is an essential part of attracting customers and maintaining your restaurant’s overall profitability — miscalculating food costs can create serious problems.
However, there is more that goes into this process than you may realize, and the impact on your bottom line needs to be considered carefully.
Estimate Food Costs For Each Dish
What are the ingredients of the menu item you are creating? Be sure to include everything used, including:
- Seasonings
- Cooking oil
- Garnish
- Meat
- Vegetables
- Fruit
The typical rule is that you should charge at least 30-35 percent more for the meal. You would calculate your minimum food cost with the following formula:
Product cost/.35 = Menu Price
So for a dish that costs you $5 to make, the minimum you should charge in order to make a profit is $14.28. If you have a dish with seasonal ingredients, know that the price of those ingredients will fluctuate throughout the year.
Be sure to get detailed quotes from your suppliers so you can accurately estimate how much each ingredient costs.
Take Control Of Your Menu & Portion Sizes
Understanding your restaurant’s portion control and menu size will help you keep both portions and food costs under control.
Controlling menu items is a critical part of managing food costs; overbuying product means a lot of food waste. To help alleviate these problems, it is recommended that each ingredient you purchase be used in at least three dishes.
Understand Your Customers & Area
Additional factors you should take into consideration when calculating your restaurant’s food costs are your customers and where you operate. Whether they know it or not, customers have a limit on how much they are willing to spend, and if you have a pricey menu in an area where people do not traditionally spend $30 for a dish, then you won’t see a lot of business.
Knowing your customers and region will help keep your food costs reasonable and profitable for you, as well as allow you to offer attractive menu prices to your guests.
Use A POS System To Consolidate Data
A reliable POS system will help you consolidate your restaurant’s data to determine how well dishes sell and if your food costs are within your means. A cloud-based POS system will allow you to access this information on the fly with just the touch of a button.
Whether you’re at another restaurant location or talking to suppliers, having instant access to updated food cost data will allow you to make the best choices to keep your restaurant running profitably.