How to Calculate Restaurant Food Costs

It’s no secret that running a restaurant is tough. In fact, most restaurants never make it past their first year!

A common concern among restaurant owners is managing food costs. To manage your food costs, you need to understand how they affect your profits.

Understanding your food costs is vital because it directly relates to your restaurant's profitability.

In a restaurant, food costs are commonly presented as a percentage, which is calculated using the food cost percentage formula. This formula gives restaurant owners insight into how much of their revenue translates into profit they can use to grow the business.

The food cost percentage shows the ratio of the cost of ingredients for a particular dish to the revenue generated from these ingredients.

Many new restaurateurs don’t take the time to understand their business numbers before opening their restaurants. This can create problems if they price menu items too low relative to their costs or serve unnecessarily large portions.

If all of this sounds complicated and you’re unsure how to calculate your food cost percentage, don’t worry—this infographic will help you out.