How to lower your restaurant's food cost, starting with the formula

Your food cost percentage is the share of your food sales that went to pay for the food itself. To lower it, first make sure you measure it the same way every week, then work on what you pay, how much you use and what you charge.

Below you will find the formula with a worked example, then a checklist you can start on this week. Each step links to a longer guide.

The food cost percentage formula and the COGS formula

You need two formulas. The second one feeds the first.

Food cost % = cost of food used / food sales x 100

Cost of food used = opening inventory + purchases - closing inventory

Cost of food used is also called COGS, short for cost of goods sold. In plain words, it is what your food cost you over a period. Here is what each part means:

• Opening inventory is the dollar value of the food on your shelves at the start of the period. You get it from a count.
• Purchases are the food you bought during the period, from your invoices, minus any credits the vendor gave back.
• Closing inventory is the value of the food on your shelves at the end of the period, from the next count.
• Food sales are what you sold in food over the same days, before tax. You get this from your POS (point of sale, the system your register runs on).

The closing count of one week becomes the opening count of the next. Once you count every week, each new count gives you a new weekly food cost.

A worked example

Juniper Kitchen counts every Monday morning before the first delivery arrives. Here is one week:

For every $100 of food Juniper Kitchen sold that week, about $31 paid for the food on the plate.

Owners often ask what a good number is. Start by comparing it with your own last four weeks. A steak and seafood menu runs a different food cost from a pizza menu, so a figure from someone else's restaurant tells you little about yours. If your number climbs two or three weeks in a row, that is your cue to dig in.

The same formula for one plate

Plate food cost % = plate cost / menu price x 100

Plate cost is the sum of every ingredient on the plate, each at the price you last paid for it, per unit. Here is a burger that sells for $14:

$3.75 / $14 x 100 = 26.8%.

Convert ounces to pounds before you multiply. A 6 oz patty is 6 / 16 = 0.375 lb, and 0.375 x $5.60 = $2.10.

Modifiers change the plate too. "Add bacon" and "swap to sweet potato fries" each have a cost, and it is easy to price an add-on below what it costs you. The guide on how to cost a recipe has a free template and covers modifiers.

Three mistakes that make the number wrong

1. Using purchases instead of usage

Dividing this week's invoices by this week's sales is quick. It is also wrong any week your shelves change. In the example, purchases alone give 9,000 / 32,000 = 28.1%. That looks three points better, but Juniper Kitchen also used $1,000 of food it had bought the week before. Next week the kitchen restocks and the purchases-only number jumps. The owner sees a bad week that never happened. Only the count-based formula tells you what you used.

2. Mixing beverage with food

Beer, wine, liquor and soft drinks cost and sell differently from food, so track them on their own. Put beverage purchases against beverage sales and food purchases against food sales, and count the bar separately from the kitchen. Paper goods, cleaning supplies and to-go boxes belong outside food cost as well.

Say $1,500 of Juniper Kitchen's $9,000 in invoices had been beer and to-go boxes. Its real cost of food used would be $8,500, and its food cost 26.6%. Mixing them in made food cost look almost five points worse than it was.

3. Valuing counts at old prices

A count is a list of quantities. To turn it into dollars, you multiply each line by a price. If that price comes from an old price list, every price change since then is missing from your count.

Say you counted 40 lb of chicken thighs. At $2.50 per lb, the price from the spring, that line is worth $100. At $3.10, the price on your last invoice, it is worth $124. That is $24 off on one line. Across 150 items and a few months of price changes, the error can be bigger than the change you are trying to measure. Value every line at the last price you paid on an invoice, and use the same rule for the opening count and the closing count.

The checklist: nine ways to lower your food cost

The first four steps are about what you pay. They need no change in the kitchen, so they are a good place to start.

1. Put every item on the same unit

Vendors sell the same item in different pack sizes, so case prices don't compare. Turn each price into a price per pound, per each or per fluid ounce.

Valley Fresh Produce sells Roma tomatoes at $32 for a 25 lb case. That is $1.28 per lb. Heartland Foodservice sells them at $27 for a 20 lb case, which is $1.35 per lb. The cheaper case is the more expensive tomato. More in how to compare prices across your food vendors.

2. Check prices before you order

An invoice shows you the price once the food is already on your dock. Look up current prices on your vendors' websites or price sheets while you build the order, at least for the items you buy most.

3. Price your top items at two vendors

Pull last month's invoices and list the 20 items you spent the most on. Get a price per unit for each from at least two vendors. Ask your rep for a price sheet, or look the item up on the vendor's website. Count the delivery minimum and any fees, since a cheaper item can cost more if it means an extra delivery.

4. Watch for pack size changes

A case price can stay the same while the case gets smaller. A 10 lb bag of shredded cheese at $42 is $4.20 per lb. If the bag becomes 9 lb at the same $42, you now pay $4.67 per lb. That is 11% more per pound, and the case price never moved. Check the pack size on invoice lines for your top items. See how to spot supplier price increases and pack size changes.

5. Count on a schedule and value counts at what you paid

Count on the same day, at the same time, in the same shelf order, every week. Before the first delivery works well, because nothing is half put away. Value each line at the last price you paid. If a weekly full count is too much to start with, count everything once a month and add a weekly count of your 20 most expensive items. Our restaurant inventory count sheet is a free template you can print.

6. Cost your best sellers

You can make progress before every recipe is costed. Pull your POS sales report, take the 10 items that bring in the most sales, and cost those plates with the per-plate formula above. Re-cost them when a main ingredient changes price. A best seller with a high food cost % is where a small fix pays back the most.

7. Check every invoice for short, damaged and wrong items

Check the delivery against the invoice before the driver leaves. Look for items that are short (fewer than you were billed for), damaged, or wrong (a substitute you didn't order, or a different pack size). Note each one on the invoice, ask the vendor for a credit, and check that the credit shows up later. Every missed credit is food you paid for and never got. The guide on how to read and check a food distributor invoice walks through a real-looking invoice line by line.

8. Fix the menu price or the portion

When a plate costs more than it used to, change what goes on the plate or change what you charge.

Start with the portion. Weigh a few plates during a busy service. If the recipe says 8 oz of fries and the line is serving 11, a smaller scoop fixes it. If the portion is right and the cost still went up, raise the price. On the $14 burger, a $0.50 increase takes the plate from 26.8% to 25.9%.

9. Review it every week

Pick a day and keep it. A 20-minute review can cover five things:

• This week's food cost % next to the last four weeks
• The five biggest price changes on your invoices
• Credits you are still waiting for
• The plate cost of your 10 best sellers
• One thing to fix before next week

How RestaurantMate keeps this number for you

Everything above works with a clipboard and a spreadsheet. RestaurantMate does the math and the price checks for you, using the vendors you already buy from.

The COGS page shows two numbers side by side. Actual food cost comes from two counts, using the formula above: opening count + purchases - closing count. Theoretical food cost is what your recipes say the food you sold should have cost, using sales from your POS (Toast and SpotOn today; we add your POS on request). The gap between the two is usually waste, over-portioning (serving more than the recipe says), comps (meals given away free), a missing invoice or a counting mistake. Recipe prices come from what you paid on your invoices, and AI never guesses a price.

A tab called Bought vs used compares what you bought with what your recipes used, ingredient by ingredient. It needs no count, so you can spot a gap between counts. The gap also includes spoilage and stock still on the shelf.

Staff do counts on a phone, shelf by shelf, and each line is valued at the last price you paid on an invoice. Prices from the vendors you connect are refreshed overnight and put on the same unit, so you can compare them before you order. On every invoice, you can mark items damaged, short or wrong, line by line, and track each one.

Each location gets a weekly report by email, with a PDF attached. It shows last week's sales, food cost and purchases, the price moves, and three things to do next week.

Miguel owns restaurants in Los Angeles. With RestaurantMate, he has cut his food purchases by about 10%, and by 20 to 30% on some items where he switched vendors. When we asked him to wait three weeks for a new version before adding his second location, he wrote back: "No, it would be great if you could onboard me today. I cannot imagine running my second location without RestaurantMate anymore."

RestaurantMate is free for 60 days, then $99 a month per location, plus a $300 refundable deposit for the RestaurantMate device (one device covers up to two locations). You don't need a card to start. Get started or try the live demo.