Food cost | Determining Food Prices and Food Cost

Food cost is the percentage of total sales spent on food. A restaurant food cost is between 25- 35 % . Food cost is very essential to calculate because :-

1. How much we pay for the food will determine how much we need to charge.

2. It also helps us to know profit percentage.

3. Lower is the food cost , higher will be our profit..

4. It helps to plan the menu precisely and correctly.

5. It helps us to know our cost for a plate 

  • To determine food cost ,first of all calculate cost of each ingredients used separately. We should calculate the cost of different commodities used individually like meat, vegetables , condiments.

  • Now we should add all the cost which will gives us  cost per serving .
e.g - If  I have used 100 rupees chicken, 30 rupees vegetables and 20 rupees condiments then my cost per serving will be 100+30+20 = 150 Rupees.

  • Now , we can calculate food cost percentage by , food cost percentage = food cost divided by food sales * 100

e.g - If my cost is 150 Rupees and I am selling it in 500 . My food cost percentage will be 

    150/500 * 100  which will be  30 %

  • If I subtract  100% with food cost % ,it will give me gross profit on food.

 e.g - 100 - 30 % = 70% gross profit

  • Also , If I have calculated all the cost of ingredients and identified cost per serving , I can directly set price by dividing food cost food cost percentage which is between 30-35 percent at most.

e.g if 150 is my cost per serving , and most restaurant have food cost between 30-35%. I can directly divide 150 with 30% which will be Rupees 500.

  • The rupee 500 can be break down into labour cost, fixed cost, profit,variable cost, food and beverage cost in broad sense.

Also, some use market minus pricing strategy which I don't Recommend because instead of going for what my competitor are charging , what will the market pay ? I can use best ingredients, size and portion it properly and deliver value to customer with my own pricing. 

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