The Food Cost Formula Explained
Weve already discussed the ideal food cost formula of ingredient cost divided by revenue.
The actual food cost is more accurate and helpful, because it measures the exact food cost for any given period of time. This way, you can see how your costs compare to the ideal, as well as how your costs change throughout the year and across multiple years.
To calculate the actual food cost, youll need to get more detailed. Here are the elements needed:
- Beginning inventory: the food costs for the inventory you have at the beginning of this time period
- Purchases: the cost of any additional ingredients you buy during this time period
- Ending inventory: the food costs for the inventory thats left over by the time the period ends
- Food sales: the revenue made during the time period
To calculate, you add the beginning inventory and your monthly purchases. Then subtract the ending inventory. Divide this number by your food sales and multiply by 100 to get a percentage.
Lets work through this with an example.
Example of how to cost a restaurant recipe
Say that you want to see the recipe cost for your fettuccine alfredo in the month of June.
As we mentioned above, each dish costs $7 for the raw ingredients , and you sell it for $18. This means an ideal food cost of 38%.
Heres the breakdown of your actual numbers for June:
- Beginning inventory = $700
- At the beginning of June, you had enough ingredients to make 100 servings
- 100 x 3 = $300 worth of pasta, 100 x 4 = $400 worth of sauce
/ 3,420
How To Lower Your Food Cost Per Dish
Every time you cost a recipe and see that it potentially can be the reason you lose profit, you should make a decision on how to cope with it. Depending on the cause of the food cost increase you may do the following:
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Reduce the amount of the key ingredient in the dish, if its price increases temporarily and you expect it to come back down soon.
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Substitute an ingredient for lower-cost ingredients for the season.
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Reprice the dish if you expect the costs remain high for a long period.
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Train staff to sell more of the menu items that have lower costs and higher profit margins.
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Reconsider the preparation process if the menu item often gets overcooked or spoiled by some other reasons.
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Remove a menu item off the menu if none of these changes work.
If you own a pizzeria and want to find out what pizza recipes bring you profit, use the sales data from your system. For example Poster POS users can look at ABC analysis report and find out what are their stars and dogs at a glance.
Having high food cost dishes on the menu is unavoidable. Moreover, a higher food cost for a dish can mean a higher profit at the same time. This is because high-cost dishes sold at high prices may bring in more gross profit dollars and a larger profit. However, you should look at the real numbers and balance high and low food cost dishes on your menu to maximize your profit margin.
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Useful tips, articles, webinars about the restaurant business
Calculate Bulk Produce Items
For bulk produce items, take the total price listed on the receipt and divide by the number of items purchase. The total price for this bag of yellow onions listed on the receipt was $1.69 and there are six onions in the bag, so each onion is approximately $0.28. Record this price on your recipe ingredient list.
This method works good for other bagged produce, like apples, carrots, oranges, lemons, potatoes, etc. and also things like packages of chicken thighs or breasts.
For garlic, each head is usually around $0.60-$0.65 and I get on average about 8 good sized cloves from each head, so I just estimate about $0.08 per clove.
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How To Calculate The Cost Of A Recipe
– Last updated: May 29, 2021
Calculating the cost of a recipe can be a great way to ensure that your planned meals for the week will fit into your grocery budget.
Although this can be a time consuming task, it really can help you save money in the long run because you can see the cost of the meal before buying the ingredients and committing to the meal.
If you find that a recipe does not fit into your budget, you can look for substitutions or ways you might be able to make the recipe work for you and your family. This can include reducing or replacing expensive ingredients, or finding a substitute for them.
Ingredients And Procedure Of Mango Float:
Keep your eye on the preparation were going to show you to give you better ideas to create a sweet and delicious recipe of Mango Float. We prepare it with making it as a business in mind.
Clear View Plastic Containers for Business
This Clear View Pastry Container that we use is a perfect packaging for this Mango Float. If your graham float is watery and not stable, we do not recommend this one you should get the tub with the detachable fitted lid. You can buy this pastry container at Lazada or Shopee with the attached flat lid.
These Pastry Containers are sold by for only P48.00, and you can also find this at any leading supermarket for P52.00-P55.00/pack.
We also recommend you visit Baking Supplies or Baking Stores that are near your location.
Now, were going to show how much it would cost for you to start this small business.
Ingredients and Costing:
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Heres How Not To Calculate The Cost Of A Recipe:
1 bag of flour is $1.29 1 bag of sugar is $1.49 1 container Salt .50 1 Container Shortening $2.69 1 container of baking powder .56¢
$1.29 + $1.49 + $0.50 + $2.69 +$0.56
The total cost of recipe $6.53 because I had to buy all the ingredients.
Its incorrect to figure the entire cost of ALL the ingredients because you didnt use ALL of the ingredients. There are a number of ingredients still left for you to make many more recipes, therefor it did NOT cost you $6.53 to make the recipe.
Now, lets take a look at the price of 40oz of Bisquick, it is currently listed for $3.28 for a 40 oz box. Weve already discovered that it costs us only $1.04 to make the same amount of homemade quick mix.
When You Know The Serving Size And Container Size
Take the container size and divide by the number of servings. This will allow you to first figure out the cost of each serving in the container.
- For example: Organic Peanut Butter cost $3.49 per jar. There are 14 servings in each jar, so each serving cost $0.25.
- In this example a serving size is 2 tablespoons, which means that 2 tablespoons of peanut butter cost $0.25, one tablespoon then costs about $0.13 and ¼ cup costs $0.50 .
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Ways To Control Food Costs
Kitchen Organization Establish a standardized system for ordering, receiving, storing, and production
Employee Training Train everyone to follow the system by adopting standardized recipes and procedures that control portions, use trim and leftovers efficiently, rand educe spoilage and waste
Standardized Recipes and Procedures This is done so that there is consistency in production and food costs
Menu Costing By calculating a per portion plate cost for each menu item, a realistic selling price can be set
Portion Control One of the easiest ways to control food cost is to establish standardized portion sizes, and to train employees so they know and use them
Production Forecasting By using sales history to determine production you can reduce food waste and overproduction. Establish a prep sheet with par levels for all food items to help your staff in planning production
Overproduction This results from lack of proper forecasting based on a sales history which increases waste not just in food but also in labor costs
Improper cooking and re-fires Proper staff training will reduce waste occurring from improperly prepared food
Using leftovers and Trim Re-purposing trim or the overproduction of food for other preparations is a trick that will help to reduce waste and increase profit margins
Ordering Improper ordering of food leads to spoilage and ties up money in excess inventory
How To Manage Purchases To Lower Food Cost Per Dish
We suggest you stay aware of the price you currently pay for every ingredient you buy. Its important to notice when prices change sharply under the influence of market trends or seasonality. Make sure that every time your employees add products in your restaurant POS system, they pay attention to the previous purchase price and report fluctuations.
Managers who use Poster POS see the last price entered for every product when they accept deliveries and add them to the system. This makes it easy to notice the purchase price fluctuations and find ways to optimize recipe costs timely.
There may be some purchase price range for every product that allows you to stay within your desired portion cost. But every time the price goes up, you should take measures to keep the recipe cost within the desirable limit. For example, you can revamp your menu timely so that your recipes include more affordable ingredient alternatives, like less expensive cuts of meat or in-season fruits.
Some dishes on your menu may include ingredients that tend to vary in quality from one delivery to another, like oranges or potatoes. Their usage increases dramatically if the quality is low. You should keep an eye on the food cost for those items in order to spot an unreliable supplier and improper quality check when the products arrive at your restaurant.
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What Recipe Costing Software Can Do For You
Recipe costing software is a fantastic tool that foodservice providers should incorporate into their daily operations.
In essence, a recipe costing software enables users to use an ingredient cost database to calculate the cost of the ingredient used in the recipe and determine the total recipe costing. The software then allows users to list all ingredient costs available in the ingredient price database and add suppliers to the system for visibility.
Other Food And Beverage Templates
- Cocktail Cost Calculator – Simple calculator, which helps to calculate cost of alcoholic beverages used in cocktails.
- Food Stocktake Template – Food stock control, stocktaking and monitoring solution for small business.
- Beverage Stocktake Template – Beverage stock control, stocktaking and monitoring solution based on Microsoft® Excel® spreadsheet.
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Wait For Your Application To Be Approved Or Rejected
Once your patent is approved, the patent office will contact you, youll pay a publication and issue fee and then your patent will be granted. If your patent application is rejected, you will have the opportunity to appeal that decision or make amendments suggested by the patent office. Then, you can resubmit your patent application for a second review.
If your patent application is rejected, but you still want to protect your recipe, consider declaring it a trade secret. Anyone who knows the secret will be required to sign a non-disclosure agreement so that the recipe will not be disclosed.
Menu Mix Menu Pricing And Margins
Lobster can gross more raw dollars than less expensive items on the menu like soups or salads
Some menu items are higher profit and lower cost than others. Soup and pasta are typically a low cost/high markup item. Some menu items like soup, may have a 10% food cost while other items, like steaks and lobster, may be 40% or more. The goal in writing a menu is to have a balanced mix of menu items to achieve a consistent overall food cost that is in line with the monthly operating costs.
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Whats A Rich Text Element
The rich text element allows you to create and format headings, paragraphs, blockquotes, images, and video all in one place instead of having to add and format them individually. Just double-click and easily create content.
Static and dynamic content editing
A rich text element can be used with static or dynamic content. For static content, just drop it into any page and begin editing. For dynamic content, add a rich text field to any collection and then connect a rich text element to that field in the settings panel. Voila!
How to customize formatting for each rich text
Headings, paragraphs, blockquotes, figures, images, and figure captions can all be styled after a class is added to the rich text element using the “When inside of” nested selector system.
âIâm loving Meez!. Itâs been instrumental in developing our new menu items and rolling out to the teams. The ability to push certain recipes to specific stores when weâre piloting recipes is awesome. And the âDocsâ feature is Huge!â
“Every Chef’s Dream”
“Choosing the right tool for the right job is one of the first lessons a chef learns in the kitchen. meez is an indispensable tool for organizing recipes, teaching and sharing culinary information, ensuring clear communication for creative work, and consistently producing delicious food.”
“We execute with consistency on a level we never could before meez. We can trust that even a new cook with no experience can execute our food.”
Takeaways From These Findings:
- If youre on a budget and dont care as much about organic or extra ingredients, buying JIF or a similar brand from Costco or other bulk grocer is the cheapest option by far.
- If you want one ingredient peanut butter with no extra sugar or preservatives, making peanut butter at home with peanuts purchased in bulk is the cheapest option.
- If you want organic peanut butter but do not have time to make it at home or do not have access to peanuts in bulk , you should definitely purchase it at Trader Joes for the best price.
- Based on these prices, I would always suggest making your own peanut butter over buying local, more expensive brands.
- I think its time to start making more peanut butter at home!
Did you make this? I want to see how it turned out! Tag me in your social media post and use #projectmealplan when you share!
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Increasing Profitability Without Removing A Menu Item
Youve done all of your restaurant food costing, but your profit margins are starting to shrink. Ingredient prices are rising, and you cant cut back on staff. There are a few options that you have before nixing an item from the menu.
- Portion sizes. Take a hard look at the portion size youre providing. If you find that the majority of guests take food home or discard food, it may be time to reduce the portion by 10%. A small reduction in portion size can mean a drastic savings in ingredient costs.
- Substitutions. You have to be careful with substitutions, but they may be able to save you a lot of money. When a certain ingredient cost rises, you may be able to substitute for a similar brand or item without impacting the taste or quality of the food. Work with suppliers to be able to find items that you can substitute if prices rise above acceptable levels.
- Alcohol. One way to increase the profits per plate is to sell alcohol. The costs are very minimal, and the profits are much higher on alcohol or wine than on many menu items. You may not be able to increase the menu price for an item, but you can increase spending totals with drinks.
You can also decide to train staff to recommend menu items that have a higher profit margin. Specials of the day can be used to push these higher profit menu items to customers so that youre able to recuperate some of the costs from inflated ingredient costs.
You may also be at risk of false advertising.
Menu Costing: How To Calculate Food Cost For A Recipe
Menu costs are an essential part of your restaurants profitability. You cant just jot down a menu price and hope for the best. Calculating overhead requires you to play the role of recipe cost calculator.
You need to consider everything, from the ingredients to how long the item takes to prep and cook, in your cost per item.
Understanding the true cost of your menu items allows you to formulate a profit margin that is perfect for your restaurant. When you know the overall cost, you can follow food pricing guidelines to ensure that every dish provides you with a profit.
Restaurant food costing, also called plate costing, sounds simple. But you have to go beyond the basics to find the actual costs of each item.
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Cost Of Ingredients: Direct Costs
Now onto the second part of my equation, the cost of youringredients! These are considered to be your direct costs.
Direct costs include the ingredients you use to make each cake. Its incredibly important that you track these, so you know how much it costs you to make a cake.
Most of us have our list of go-to recipes , and its actually pretty easy to calculate the cost with a little bit of leg work.
This might be my CPA showing, but I created an excel spread sheet to help me quickly calculate the cost of each of my cakes. I know that not everyone loves numbers as much as me, but I do think that most bakers out there enjoy being organized and precise.
What Method Do You Use
Here on Budget Bytes I use the same method of calculating recipe costs used by commercial food service operationsadding the costs of each ingredient used, in the amount used, rather than adding the full price of items purchased. Some argue that you cant just buy 2 Tbsp of olive oil, so the recipe actually costs more to make. The counter argument to that is that you dont buy an entire bottle of olive oil every time you make a recipe, nor do I consider an ingredient free if I already have it in my kitchen and didnt need to buy it for that recipe. Both methods have their caveats, but I find the method used here to be the most representative of the recipes true cost.
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