What an ideal food cost looks like by venue type

Ask how much food should cost and someone will give you a number: 28 per cent, 30, a third. The number usually comes from a book, a course or a former employer, and it is presented as a target that every kitchen should hit. The trouble is that it describes no kitchen in particular. A steakhouse, a cafe, a pizzeria and a bar that serves food run different food costs for good reasons, and a venue that chases somebody else's figure can end up making less money while its percentage looks better.

An ideal food cost is something else. In the trade, the phrase usually means the food cost your menu should produce if every dish is made exactly to recipe, with nothing wasted, given what your guests actually order. It is worked out from your own recipes and your own menu mix, so it is specific to your venue. It is also the most useful target you can set, because it is the one figure that tells you what is possible with the menu you have.

This guide explains why formats differ, what drives the differences, how to calculate your own ideal food cost and how to turn it into a target. The figures in the examples are invented to show the arithmetic. They are not benchmarks.

A food cost percentage divides what the food cost by what it sold for. Two venues can buy the same ingredients and still produce very different percentages, because what they charge, what they serve with it and what else they sell are all different.

Industry food cost benchmarks have their uses: they show that a number is in a plausible range, and they can prompt a question when a figure looks far out. But they average venues with different menus, prices, labour models and drinks sales, so they say little about any one of them. A venue that sets its target from an average is trying to look like a business it is not.

The better question is not what other venues run, but what your own menu should run, and why.

Five things explain most of the gap between formats.

Some menus are built on expensive ingredients that cannot be marked up much without the price becoming unacceptable. A steak that costs a lot to buy cannot always be sold at three or four times that cost, so its percentage is high. A pizza made from flour, tomato and cheese costs little to make, and can be sold at a price several times its cost. The steakhouse runs a higher percentage, and it may still leave more cash on each plate.

A kitchen that buys raw ingredients and does everything from scratch spends more on labour and less on food. One that buys prepared components, such as dough, sauces or portioned proteins, spends more on food and less on labour. Neither is wrong, but they move the food cost in opposite directions. Comparing the food cost of the two without looking at labour is comparing half of each business.

A venue's food cost is normally calculated on food sales alone, but many owners look at a combined cost of sales. A bar where drinks are most of the revenue, or a cafe where coffee is, can carry a higher cost on its food because the overall cost of sales is diluted by drinks with a low cost. If you compare figures, make sure they are calculated on the same basis.

What guests are willing to pay is set by the format, not by the kitchen's costs. A cafe's sandwich has a price ceiling that a restaurant's lunch dish does not. Formats with a firm price ceiling tend to run tighter food costs by necessity, and formats with more pricing freedom can choose to spend more on the plate.

Even within one venue, dishes run very different percentages. The overall figure depends on how often each one is ordered. A menu where the low-cost dishes are the best sellers will run a lower overall percentage than the same menu where guests mostly order the expensive ones. Our guide to menu mix explains how to read what guests actually order.

The descriptions below show why each format tends to sit where it does. The example figures are invented, and your own will differ.

The main ingredient is expensive, its price is visible to guests who know what steak costs, and the margin per plate is often taken in cash rather than percentage. A steakhouse usually accepts a higher food cost on its mains and recovers some of it on sides, desserts and drinks. In an invented example, a steak costing 14 to buy and prepare, sold at 38, has a food cost of about 37 per cent, but leaves 24 in cash. A pasta dish costing 3 sold at 16 runs at about 19 per cent and leaves 13.

Coffee, tea and simple baked goods have low ingredient costs and carry most of the margin. Food such as sandwiches and salads usually runs a higher percentage, because prices have a ceiling and ingredients like good bread, cheese and fresh vegetables are not cheap. Cafes often buy in baked goods, which moves cost from labour to food. Read a cafe's food cost separately from its drinks.

Dough, tomato and cheese are inexpensive, and pizza is a format where guests accept a price well above ingredient cost. Pizzerias can often run a low food cost on pizzas, especially if they make their own dough. The pressure points are toppings, which vary widely in cost, and the cheese, whose price moves. A pizzeria that adds premium toppings without pricing them separately can see its percentage drift without noticing.

In a bar, food is often a supporting act. It keeps guests longer and brings in groups, and it may be priced to encourage that rather than to maximise its own margin. Its food cost can be higher than a restaurant's for that reason. What matters is the combined result, and whether the food earns its place by what it adds to drinks sales.

Expensive ingredients, tasting menus and a high labour input. Fine dining often runs a food cost that would alarm a casual restaurant, while making its money on the cash margin per guest and on wine. The percentage alone says little here; the cash per cover says more.

A limited menu, high volume and consistent portions usually allow a tight food cost, and these formats often control it carefully, because their prices are watched closely and their margins are thin. Bought-in components are common, so labour is lower and food is higher than a scratch kitchen's.

The ideal food cost of your menu is the cost of every dish sold, at its recipe cost, divided by what those dishes sold for. You need two things: a recipe cost for each dish, and the number sold of each.

An example with three dishes, invented for the arithmetic:

The ideal cost is 5,530 on sales of 19,200, which is 28.8 per cent. If the kitchen's actual food cost for the same period was 31.5 per cent, the gap of 2.7 points is food used without being accounted for by the recipes: waste, portions, yields, count errors and the rest. Our guide to actual vs theoretical food cost explains how to investigate it.

Costing every dish properly takes time, and many venues want a figure before that work is done. A reasonable shortcut is to cost the dishes that make up most of your food sales first.

In most menus, a minority of dishes carries most of the revenue. Sort the menu report by revenue, cost the dishes at the top of the list until they account for, say, 80 per cent of food sales, and calculate the ideal food cost on those dishes alone. The result will not be exact, but it will be close enough to show whether your target is realistic, and the remaining dishes can be costed over the following weeks.

Two cautions apply. Make sure the costed dishes include the sides, sauces and garnishes that go with them, because those are where a quick estimate most often goes wrong. And do not treat the estimate as final once the rest is costed: low-selling dishes can have very high or very low percentages, and they still count.

An ideal food cost is not a number you calculate once. It moves whenever its ingredients do.

Recalculate the ideal at least when the menu changes and when a major ingredient's price moves. A target that was right in spring can be quietly wrong by autumn, and the kitchen will be judged against it.

An ideal food cost assumes perfection, which no kitchen achieves. Your target should be the ideal plus a realistic allowance for the waste, trim and small errors that every kitchen has. How large the allowance should be depends on the kitchen. Measure the gap between ideal and actual for a few months, decide what part of it is unavoidable, and set the target to close the rest over time.

This approach has three advantages over a borrowed target. It changes automatically when the menu or the mix changes, so it never becomes stale. It separates the menu's design from the kitchen's discipline, so you know which one to work on. And it gives the team a figure that is achievable, because it was built from their own recipes.

When the ideal itself is too high for the business to make money, the answer is in the menu, not the kitchen: prices, recipes, portion sizes or the dishes you promote. Our guide to calculating food cost percentage covers the calculation underneath all of this.

A low food cost percentage is not a goal in itself. The goal is enough cash left over after food, labour and overheads. A dish with a higher percentage can leave more cash than one with a lower percentage, as the steakhouse example showed, and a menu that pushes guests towards low-percentage, low-price dishes can make less money than one that does not.

That is why many operators look at gross profit per dish alongside the percentage: the cash each dish leaves after its ingredients. Our guide to gross profit on a dish explains it, and menu engineering shows how to use it with popularity to decide what to promote, re-price or remove.

The percentage also needs reading with labour. A kitchen that moves from bought-in components to making things from scratch will see its food cost fall and its labour rise. Prime cost, food and labour together as a share of sales, captures both. The idea is summarised in Wikipedia's article on prime cost, and our guide to labour cost counted properly covers the labour side.

A target built from your own recipes changes the conversation with the kitchen. Instead of "we need to hit 28 per cent", which nobody on the line can act on, the discussion becomes specific: the menu should run at 28.8, last month ran at 31.5, and the gap is in a handful of dishes or habits that the team can name.

Share the ideal and the actual with the head chef every week, and the dish-level detail behind them. Chefs who see that the short rib's recipe cost has risen with the price of beef will often suggest the fix themselves: a different cut, a smaller garnish, a change of side. Chefs who are simply told the percentage is too high will cut portions on whatever is easiest, which is rarely the right dish.

Be clear, too, about what the kitchen controls and what it does not. Prices, menu design and the mix are mostly decisions made outside the kitchen. Waste, portioning and yields are the kitchen's. A target that blurs the two is a target nobody owns.

Benchmarks are not useless. They are a sanity check. If your ideal food cost comes out at 12 per cent or 60 per cent, something in the costing is probably wrong, and a published range for your format can prompt that question. They can also help when you are planning a new venue and have no recipes or sales yet.

Use them in that spirit: as a prompt to check, not as a target to hit. And when you see one, ask how it was calculated. Food sales only, or food and drink? Net of tax or not? Including staff meals and waste or not? Two benchmarks calculated differently cannot be compared, and neither can be compared with your own figure until you know.

Your ideal food cost needs two halves: the recipe cost of each dish and the number of each dish sold. servearound covers the second. The recipe costs stay in your own costing sheet today.

The menu report in Analytics shows units sold, revenue and share of sales for every dish and every category over any range of dates. That is the menu mix you need to weight recipe costs by, and the revenue to divide them into. Run it for the same four weeks as your costing and the arithmetic above is quick to do in a spreadsheet.

servearound does not hold recipe or dish costs today, so the cost side of the sum stays with you. If you would like to see the sales side, get in touch.

It is the food cost your menu should produce if every dish is made exactly to recipe with nothing wasted, given what guests actually order. It is calculated from your recipe costs and your sales of each dish, so it is specific to your venue.

In most kitchens, yes. Both describe the recipe cost of what was sold, divided by what it sold for. Some people use ideal for a target and theoretical for the calculation, but the arithmetic is the same.

There is no single good figure, because formats differ for sound reasons. The right figure for you is your own ideal food cost plus a realistic allowance for waste and trim, checked against whether the menu leaves enough cash after labour and overheads.

Steak is expensive and its price has a ceiling, so it carries a higher percentage. Pizza is cheap to make and can be priced well above its cost. The steakhouse may still leave more cash on each plate.

Calculate food and drinks separately, so each can be managed on its own. If you also look at a combined cost of sales, label it clearly, and never compare a combined figure with a food-only one.

Whenever prices or the menu change significantly, and at least every few months as the mix shifts. A target that is never recalculated drifts away from what the menu can achieve.

As a sanity check, yes; as a target, no. Use them to spot a costing that is far out of range, and always check how they were calculated before comparing them with your own figure.

There is no universal food cost target. Formats differ because of ingredient costs, price ceilings, labour in the price, drinks sales and the menu mix, so a steakhouse, a cafe, a pizzeria and a bar each sit in different places for sound reasons. Borrowed food cost benchmarks are a sanity check at most.

Your ideal food cost is the recipe cost of what you sold, divided by what it sold for. Calculate it from your own recipes and the units sold of each dish, set your target at the ideal plus a realistic allowance, and recalculate when the menu or prices change. Then read the percentage alongside gross profit per dish and prime cost, because the goal is cash left over, not a smaller number.