How Calculating Food Costs Manually Might Hurt your Restaurant

If you’re of the “if it ain’t broke, don’t fix it” school of thought, you might still be calculating food cost manually. While that may have worked for you in the past, there are some significant drawbacks to this method over using food cost software.Humans Make ErrorsYou probably don’t do the math for fun in your spare time. You might even detest it. But as the restaurant owner or manager, calculating food cost is your responsibility. But what happens if you miscalculate by even a percent? You may think you’re making more profit for a menu item than you actually are, and then you won’t be able to unravel why your business isn’t making enough profit overall.

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Inventory is a Separate Step (But Doesn’t Have to Be)

Manually calculating food cost happens entirely outside of the inventory process (which you’re probably also doing manually). But today’s inventory management software lets you do it all in one place, which is useful, since the price you pay to order ingredients will impact your food cost, and may fluctuate.

Seasonal Fluctuations are Harder to Calculate

Speaking of fluctuations: certain ingredients cost more or less during certain seasons. If you’ve manually calculated your BLT sandwich that comes with avocado in the middle of avocado season, you’ll have to recalculate that food cost again when they’re out of season and significantly higher. When ingredients rise in price, it’s a smart idea to compensate for that fact by either finding a similar and comparably priced replacement ingredient or charging more for it.

It’s Time Consuming

The time you spend calculating food cost manually is the time you’re not spending on other aspects of running your restaurant. And the more you struggle with the math, the more time it will take. With so many responsibilities in running a restaurant, there’s absolutely no reason why you should be wasting time on food cost calculations when there is software to make your life easier.

You Don’t Get Real-Time Cost Alerts

If you don’t happen to notice that a supplier is now charging you 5% more for an ingredient, you won’t know to update your food cost. Recipe costing software provides you with real-time cost alerts so that if the price for an ingredient increases, you know immediately, and your software can recalculate what that dish costs now.

You Won’t Automatically Know Which Menu Items are Unprofitable

Beyond calculating the cost for each dish on your menu, you also need to be aware of which items on your menu are Dogs, or unprofitable and unpopular. Digging manually into past sales can be a time-sucking nightmare. But restaurant management software can give you an alert for unprofitable menu items so you can remove them from your menu and focus on Stars, those items that are popular and profitable.

Cutting Calculation Corners Can Cost

You might be tempted, when manually calculating food costs, to skip seemingly insignificant ingredients like a sprinkle of salt or a dash of oil. That, unfortunately, throws off your recipe cost calculation and will end up costing you. A dash of salt might be worth less than a penny, but over a year, that cost can add up. Not including it is detrimental to your business because you don’t have an accurate idea of your menu items cost.

The Magic of Food Cost Software

The bottom line is: manually calculating food costs is time-consuming and can cost your restaurant more than you realize. But with restaurant management software that combines food cost calculations, inventory management, and purchasing and ordering — all of which rely on one another — you can get a more accurate view of what each dish cost to make, including labor and overhead, and can ensure that you charge enough to cover expenses plus a profit margin.

How Calculating Food Costs Manually Might Hurt your Restaurant

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If you’re of the “if it ain’t broke, don’t fix it” school of thought, you might still be calculating food cost manually. While that may have worked for you in the past, there are some significant drawbacks to this method over using food cost software.Humans Make ErrorsYou probably don’t do the math for fun in your spare time. You might even detest it. But as the restaurant owner or manager, calculating food cost is your responsibility. But what happens if you miscalculate by even a percent? You may think you’re making more profit for a menu item than you actually are, and then you won’t be able to unravel why your business isn’t making enough profit overall.

Five Profit-Impacting Trends Shaping the Restaurant Industry in 2023

🔓 Unlock the secrets to restaurant success with actionable strategies for optimizing operations, maximizing profits, and building a loyal customer base.

Download Resource

Inventory is a Separate Step (But Doesn’t Have to Be)

Manually calculating food cost happens entirely outside of the inventory process (which you’re probably also doing manually). But today’s inventory management software lets you do it all in one place, which is useful, since the price you pay to order ingredients will impact your food cost, and may fluctuate.

Seasonal Fluctuations are Harder to Calculate

Speaking of fluctuations: certain ingredients cost more or less during certain seasons. If you’ve manually calculated your BLT sandwich that comes with avocado in the middle of avocado season, you’ll have to recalculate that food cost again when they’re out of season and significantly higher. When ingredients rise in price, it’s a smart idea to compensate for that fact by either finding a similar and comparably priced replacement ingredient or charging more for it.

It’s Time Consuming

The time you spend calculating food cost manually is the time you’re not spending on other aspects of running your restaurant. And the more you struggle with the math, the more time it will take. With so many responsibilities in running a restaurant, there’s absolutely no reason why you should be wasting time on food cost calculations when there is software to make your life easier.

You Don’t Get Real-Time Cost Alerts

If you don’t happen to notice that a supplier is now charging you 5% more for an ingredient, you won’t know to update your food cost. Recipe costing software provides you with real-time cost alerts so that if the price for an ingredient increases, you know immediately, and your software can recalculate what that dish costs now.

You Won’t Automatically Know Which Menu Items are Unprofitable

Beyond calculating the cost for each dish on your menu, you also need to be aware of which items on your menu are Dogs, or unprofitable and unpopular. Digging manually into past sales can be a time-sucking nightmare. But restaurant management software can give you an alert for unprofitable menu items so you can remove them from your menu and focus on Stars, those items that are popular and profitable.

Cutting Calculation Corners Can Cost

You might be tempted, when manually calculating food costs, to skip seemingly insignificant ingredients like a sprinkle of salt or a dash of oil. That, unfortunately, throws off your recipe cost calculation and will end up costing you. A dash of salt might be worth less than a penny, but over a year, that cost can add up. Not including it is detrimental to your business because you don’t have an accurate idea of your menu items cost.

The Magic of Food Cost Software

The bottom line is: manually calculating food costs is time-consuming and can cost your restaurant more than you realize. But with restaurant management software that combines food cost calculations, inventory management, and purchasing and ordering — all of which rely on one another — you can get a more accurate view of what each dish cost to make, including labor and overhead, and can ensure that you charge enough to cover expenses plus a profit margin.

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