What is food cost, and which one you mean

What is food cost? In a restaurant, the phrase is used for at least four different things. The chef talking about the new risotto means the cost of the ingredients on one plate. The manager at the weekly review means a percentage for the week. The accountant means the cost of the food used in the month, from the stock counts and purchases. And the owner who says "our food cost is too high" may mean any of them, or all of them at once.

The confusion matters, because each version answers a different question and leads to different actions. A chef who hears that food cost is up three points may re-cost every dish, when the real cause is waste. A manager who compares the plate cost of a dish with the accountant's monthly figure will always find a gap, and may waste weeks looking for it.

This guide sets out the four things called food cost, how each is calculated, how they differ, and which one belongs in each conversation. It covers plate cost, theoretical food cost, the cost of goods sold and food cost percentage, and how the gap between theory and reality shows where money is being lost.

Food cost, in general, is the cost of the ingredients the venue uses to make the food it sells. But that cost can be measured for one dish or for a whole period, from the recipes or from the stock, as an amount or as a percentage of sales. Those choices create the four versions.

When someone mentions food cost, the first question is: which one?

The four things most often called food cost are:

The sections that follow take each in turn.

Plate cost is the cost of the ingredients in a single portion of a dish, worked out from its recipe. A dish with 180 grams of chicken at 12 per kilogram, a sauce costing 0.60, vegetables costing 0.80 and a garnish costing 0.20 has a plate cost of about 3.76.

Plate cost belongs in conversations about one dish: setting its price, changing its recipe, comparing it with another dish. It is the basis of menu pricing and of the gross profit each dish earns.

To calculate plate cost, list every ingredient in the dish with its quantity, including the oil, the butter, the salt and the garnish. Find the cost of each from current supplier prices, adjusted for yield: a whole fish that loses half its weight in preparation costs twice as much per usable gram as its price per kilogram suggests. Add them up.

Our guide to recipe costing covers the method step by step, from the box price to the plate.

Plate costs go out of date as supplier prices change. A dish costed a year ago may cost noticeably more today, and its margin may have shrunk without anyone noticing. Review the plate costs of the most important dishes regularly, and whenever a key supplier changes its prices.

A plate cost is only as good as the prices behind it.

Yield is the share of an ingredient that ends up on the plate after trimming, peeling, boning or cooking. A whole salmon may yield well under two thirds of its weight as usable fillet; a case of leeks loses its tops and roots. If plate costs use the purchase price per kilogram without allowing for yield, every dish made from those ingredients looks cheaper than it is.

Test the yields of the main ingredients from time to time, by weighing before and after preparation, and use the results in the plate costs. Yields change with suppliers and seasons.

Supplier prices move constantly, and some move a lot: fish, seafood, fresh produce and some meats can change week to week. When a key price rises, every dish that uses it costs more, and the gap between theoretical and actual food cost widens until the plate costs are updated.

Keep a short list of the ingredients whose prices move most, and check them every week or two. Update the plate costs of the dishes that depend on them, and review those dishes' prices.

Theoretical food cost is what the food sold in a period should have cost, if every dish had been made exactly to its recipe with no waste. Multiply the number of each dish sold by its plate cost, and add them up. If the venue sold 300 portions of a dish with a plate cost of 4, those portions should have cost 1,200 in ingredients.

Theoretical food cost belongs in conversations about how well the kitchen is following its recipes and controlling waste, when compared with the actual figure.

To calculate it, take the sales by dish for the period from the till, multiply each dish's quantity by its plate cost, and add the results. Include sides, sauces and extras that are sold separately. Leave out staff meals and comps, which are not sales, or account for them separately.

The calculation needs current plate costs for every dish. Without them, the theoretical figure is a guess.

Actual food cost is what the food used in a period really cost. Accountants call it the cost of goods sold: opening stock, plus purchases during the period, minus closing stock. It includes everything that was used, whether it was sold, wasted, eaten by staff, given away or lost.

The cost of goods sold belongs in conversations about the venue's results: the profit and loss, the weekly or monthly review, and the comparison with budget.

To calculate it for a month:

The result is the cost of the food used. Without a stocktake, purchases alone give only a rough estimate, because stock levels change.

Food cost percentage is any of the other versions divided by the matching sales. For a dish, it is plate cost divided by the dish's price after tax. For a period, it is the cost of goods sold, or the theoretical cost, divided by food sales for the same period.

Food cost percentage is the most quoted version, and the most often confused, because the same phrase is used for a dish and for a month. Our guide to how to calculate food cost percentage covers both.

A dish percentage and a period percentage answer different questions. The dish percentage shows how a dish's ingredients compare with its price. The period percentage shows how the kitchen's total use of food compares with total food sales. A menu where every dish is costed at 28 per cent can still have a monthly figure of 33 per cent, because of waste, staff meals, comps and price changes.

Never compare a dish percentage with a monthly figure and expect them to match.

The most useful comparison is between theoretical food cost and actual food cost for the same period. Theoretical shows what should have been used; actual shows what was. The gap is food that was used without being sold, or used in larger amounts than the recipes say.

Our guide to actual vs theoretical food cost explains where the gap usually comes from and how to close it.

The gap usually contains a mix of:

Each has a different fix, which is why knowing the size of the gap is so useful.

Each version belongs in a different conversation:

Say which version you mean, and the conversation becomes far clearer.

The weekly review needs a quick food cost estimate, because the monthly accounts arrive too late to act on. Take the week's purchases, adjust for any big change in the stock of the most valuable items, and divide by food sales. It will not match the monthly figure exactly, but it will show within days whether food cost is moving.

Our guide to a weekly review that takes thirty minutes shows where it fits.

In the accounts, food cost is the cost of goods sold for food, sometimes combined with drinks. It appears near the top of the profit and loss, below sales, and together with labour it forms the venue's prime cost. Our guide to what is prime cost explains how the two combine.

Many venues track food and drink separately, because they are bought, stored, priced and managed differently. Drinks usually carry a lower cost as a share of their price than food does. Combining them hides problems: a rise in food cost can be masked by a strong month for drinks.

Keep separate figures for food and for drink, and combine them only where a total is needed.

Staff meals are a common source of confusion. If they are not recorded separately, they sit inside the cost of goods sold and raise the food cost percentage, even though they are a benefit for the team rather than a cost of sales. Some venues record them as a staff cost instead.

Decide how to treat them, and be consistent, so the figure can be compared month to month.

Comps, food given free to guests, and waste, food thrown away, both raise actual food cost without producing sales. Recording them, even roughly, helps explain the gap between theoretical and actual. A waste sheet by the bin and a comp reason on the till are simple ways to start.

Our guide to how to reduce food waste in a restaurant kitchen covers waste in detail.

Food cost percentages should be calculated against sales after VAT or sales tax has been taken out, not against the prices guests pay. A dish priced at 21 including VAT at 5 per cent has a net price of 20; a plate cost of 6 is 30 per cent of the net price, not 28.6 per cent of the menu price.

Using the wrong sales figure makes food cost look better than it is.

Food cost can differ by service. A set lunch at a modest price may run a higher food cost percentage than an à la carte dinner, by design. A brunch package may run higher still. Looking only at a monthly figure for the whole venue can hide a service whose costs are drifting.

Where the menus differ by service, work out the theoretical food cost for each service from its own sales by dish. The comparison shows which service is carrying the cost.

Set menus, events and private dining need their own food cost calculation. A set menu priced per guest has a plate cost for the whole sequence of courses, which must be compared with the net price per guest. Events often carry extra costs, such as canapés, bread, petits fours or a special ingredient, that are easy to forget.

Cost every set menu and event menu before quoting a price, and check the actual cost afterwards for the larger ones.

A food cost percentage moves when either the cost or the sales move. A rise in the percentage may mean costs went up, or that prices were discounted, or that guests chose cheaper dishes with lower margins. Read the percentage alongside sales, covers and the mix of dishes sold before deciding what to change.

A week with a promotion or many comps will show a higher percentage for reasons that have nothing to do with the kitchen.

In a group, the four versions should be calculated the same way in every venue, so they can be compared. Shared dishes should have shared recipes and plate costs, updated centrally when prices change. The gap between theoretical and actual food cost is often the most revealing comparison, because it shows which kitchens follow the recipes most closely.

Agree the definitions centrally, and review them once a year.

The most common confusions are:

Each produces a figure that looks precise and means something different from what everyone assumes.

Agree, in writing, what the venue means by each version: how plate cost is calculated, how often it is updated, how the weekly estimate is made, what the monthly cost of goods sold includes, and whether drinks and staff meals are included. Share it with the chef, the managers and the accountant.

Once everyone uses the same words for the same things, food cost conversations become short and useful.

Here is an illustrative month for a venue. The figures are examples.

The chef retrained the team on two portions and updated the plate costs; the next month's gap fell to under 3 points.

In servearound, each dish can carry its cost, so the menu report shows gross margin once costs are set, and how much of the revenue has a cost behind it. The report lists every dish that sold, with units, checks, revenue, share, unit cost and margin, which are the inputs for a theoretical food cost, and menu analytics plots each dish by popularity and margin.

Purchases, stock counts and the cost of goods sold sit outside servearound, in your supplier invoices, stock sheet and accounts. See Analytics.

The cost of the ingredients used to make the food a venue sells, measured for one dish or for a period.

The cost of the ingredients in one portion of a dish, from its recipe and current supplier prices.

What the food sold in a period should have cost, according to the recipes, with no waste.

Opening stock plus purchases minus closing stock: what the food used actually cost.

A food cost divided by the matching sales, for a dish or for a period.

Because the monthly figure includes waste, staff meals, comps, over-portioning, price changes and errors.

Yes. They behave differently, and combining them hides problems.

An estimate of the week's food cost percentage, from purchases adjusted for key stock.

The head chef, with the general manager reviewing it each week and the accountant confirming the monthly figure. Ownership means explaining the number when it moves, not carrying the blame for it.

What is food cost? At least four things: plate cost, the cost of one portion; theoretical food cost, what the period's sales should have cost; actual food cost, the cost of goods sold from stock counts and purchases; and food cost percentage, any of these divided by the matching sales. Each answers a different question.

Use plate cost for pricing and recipes, a weekly estimate for the review, the cost of goods sold for the accounts, and the gap between theoretical and actual to find waste and portioning problems. Keep plate costs current, calculate on net sales, separate food from drink, agree the definitions in writing, and always say which food cost you mean.