Running a restaurant, like any other business, boils down to the efficiency of your inputs and your outputs. You buy ingredients, labor, and space, and you sell meals, service, and experiences. Arguably, the most important input to any restaurant is the food – it’s the whole point of the game. Calculating your restaurant’s food cost, then, is one of the most important things you can do for your business.

1. Understanding Food Cost

What is food cost?

Food cost, to put it simply, is the price your restaurant pays for food. It can be divided up in three significant ways: by recipe, per month, and per restaurant (total).

Food cost by recipe calculates the cost to produce an individual menu item.

Food cost per month extrapolates the cost of each meal over the course of a month.

Food cost by restaurant calculates the total percentage of food costs for a whole menu, without respect to time.

Note: food cost is always calculated as a percentage of the value of the meal. We can’t do much with the food cost number itself.