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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Small Business Idea :- How to Open a Panini Cafe

Whats needed to open your Panini Restaurant




Licensed by Creative CommonsNot too long ago a friend, who had several eateries, required some advice. He had acquired a location to open up a food outlet however there was a catch. He couldn’t make use of any open flame in it. Therefore I suggested to him to open up a Panini Shop. Reason being that the pressed sandwich is compact, neat as well as easy to prepare. A Panini shop is an effective approach to lure lunchtime crowd looking for a quick bite to eat. Pressed sandwiches can offer a crispy, tasty snack as well as a light lunch for your customers. Here are some points needed to open your Panini Shop or Kiosk. With regard to the necessary licenses, seek advice from your local authority to get a much better idea.

Panini Restaurant Design

Your restaurant design should have a clean, pleasing as well as comfortable atmosphere. Providing free wi-fi Internet will certainly appeal to customers working from their laptop, although you run the risk of encouraging diners to linger long after finishing their sandwiches. Obtain equipment necessary for your kitchen like cutting boards, a cold counter that you can display your ingredients, refrigerators and also stainless steel counter top for working along with other small items. Last but not least the key equipment the Panani Machine. Ensure you purchase a commercial one that is able to last longer.

Create Your Panini Menu

Making Panini sandwiches is simple; you simply need to make use of simple ingredients. You don’t need to be or even employ a Michelin Star Chef. Get good quality bread like ciabatta, rye, whole meal and so forth. Select hardy breads so they withstand the sauces as well as ingredients. As for the fillers you can include just about anything like smoked meats, vegetables, cheese and various sauces. A good Panini is generally made with only four or five flavor combinations to avoid overwhelming the taste. You can even use your local delicacies example in Malaysia; Spicy Anchovies Paste (Sambal Ikan Bilis) is a favourite. So I suggested my pal to add it to the menu.

Marketing your Panini Shop

The best way that you could market your shop is to hand out free samples. Cut various bite size sandwiches, skewered with little picks. So customers can sample different varieties. Hand out flyers to local offices, so their staff can drop by lunch breaks. Create special stamps where you can stamp on it, each time your customer purchases a sandwich you stamp on the card. Then the customer can redeem their free sandwich when they have 9 stamps. If you are in an office building you can provide delivery service to the offices when they purchase a certain amount of sandwiches.

Selling Add Ons

In my earlier post “Restaurant Promo Ideas #22- Little Things to Help your Customers Spend More” I sold add ons (Souvenirs) in my pub. I sold products with a Pirate Theme that suited my Pub. You can even offer add ons in your Panini Shop or Kiosk. You can offer bottled water, carbonated drinks, fries as well as ice cream. Should you have the space and your local authority or council allows throw around a few tables and chairs, so customers can sit down whilst enjoying their sandwich. Put a glass door fridge stocked with beverages which is visible to the customer’s view in order to entice them. Don’t price the items too high; these are additional revenue to you.

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There are some people within the coffee shop industry who have not been telling the truth about how much it actually cost to open a coffee shop or open a coffee service business. There are two reasons for this.

1. They are trying to sell you something. Either some really expensive equipment, or some expensive consulting.

2. “They” don’t want to create more competition for themselves (ie, other coffee shop owners).

Wayne Mullins a former co-owner of two successful coffee shops have written this e book called Coffee Shop Secrets which is designed to walk you through the entire process of opening a coffee shop

Coffee Shop Secrets is not for people who think they can sit on their couch and have a coffee shop magically open for you. Opening a coffee shop is work! But Coffee Shop Secrets will guide you straight through the process with the fewest possible mistakes (saving you money and your valuable time).

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