How to Calculate Food Cost to Set your Menu Price

In one of my past post. Way past. I wrote that I like to watch certain reality TV shows. Not for their double-crossing or drama. For the most part for their ideas. One of the shows that I loved watching was Restaurant Impossible. Watching this show, I found that most restauranteur don’t know a lot about food cost. That is one of their downfall. Selling food without making a profit. Well here’s a little post on the best way to know about food cost. I will attempt to make it as simple as possible.

What is Food Cost?

Its a very basic and important calculation that all restaurant owners should know. Indeed, even those that are doing or going to do online food business should know. Food cost is the ratio of the cost of ingredients used for a dish or serving. Furthermore, the income (gross profit) from a dish. Food cost is expressed as percentage known as food cost percentage. Food cost rate is significant in deciding the selling cost of each item.

How To Calculate Food Cost

 

Step 1. List All Ingredients

The first step is to list all ingredients needed to make that specific dish. Ensure that you list the estimation of every ingredient as detailed as possible.Take for instance, you intend to put Caesar Salad in your menu. You can make on Excel something like the table below or you can get a format from the web. There’s heaps of free layouts, simply alter to suit your restaurant.

The table above I have listed all the ingredients needed to make a plate of Caesar Salad.

Step 2. List Down the Cost of Each Ingredient.

At the side of each item, list down the cost of each Ingredient according to the portion required.Example : – 1 kg Iceberg Lettuce cost 62. And I need only 120gm for this dish. So the cost for the Iceberg lettuce used for this dish is 7.80. List down all cost for the ingredients like table below.As its hard to calculate the amount of seasoning to use. We only use a pinch of this and a pinch of that. I add 3% to the initial cost as a buffer. You either add or don’t add its up to you.

Step 3 :- Total Up all the Ingredient Cost

Total all the ingredient cost. I created an Excel worksheet for this as you need to create lots of recipe cards. So an Excel worksheet saves alot of time.
Below is the calculation of the cost of a Caesar Salad. It is costed at 29.29

Step 4 :-  Set the Selling Price

Now that you have the cost of the dish. You can now set the selling price. The normal food cost of an establishment would be 35%. This will give you a gross profit of 75%. How this works is to calculate the cost divided by the food cost percentage multiply by 100 This will give you the ideal selling price.
Our example of the Caesar Salad dish.




As this is the price for the restaurant in Thailand, we had to add the Government Taxes of 17%. And to make it easier for the cashier and customer. We rounded up the figure to Baht 100.  After deducting the taxes, will give a new food cost of around 34%.
On setting prices for your menu items, you also need to take into consideration of how much others are selling of a similar items. You don’t want to price it too high as to turn away customers. Well thats for a future post
Below is the completed Food Cost Recipe Card. You can go a step ahead add the process and also a picture on how it should look like.

Importance of Food Cost

Knowing your food cost is important. It monitors your profitability of your menu items.  You know the amount to sell to enjoy healthy profit. Tracking your food cost is likewise a great method to control wastages. Cause if you have planed your menu well but the month end food cost is high. There should be wastages around or no appropriate control of food items. Utilizing food cost as a tracking tool. I have even found staff cheating the restaurant by pocket cash from things sold. So as a restaurateur, you should have a deep understanding of food cost. This same prinsip can be use in the beverage items as well. Make recipe cards all your beverages.

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