4 Little Known Facts About Restaurant Food Costs That Will Help You Control Yours
While food accounts for 66% of a restaurant’s menu sales, Upserve data uncovered that 80% of a restaurant’s food sales come from only 16% of menu items. As a restaurant owner or manager, that makes understanding managing food costs essential to your operations.
Anyone who owns or manages a restaurant should understand the concept of food cost percentage. This important metric shows how much of your overall restaurant sales are dedicated to food ingredients. Keeping tabs on your food costs can help you make informed menu decisions and maximize profits at every opportunity.
Whether you’re new to the game or just want to stay on top, here are four things you should know about food cost percentage.
1. It’s Not a One-Size-Fits-All Number
A common misconception about food cost percentage is that every restaurant should aim for a perfect number. In reality, a healthy percentage can vary greatly depending on the products you sell, food cost control, and the market you serve. For example, a steakhouse can run a food cost percentage close to 35% because the cost of its ingredients are much higher. On the other hand, a restaurant that serves primarily pasta–which is cheap to buy in bulk–might run somewhere around 28%. Both percentages are acceptable according to the context of the restaurant.
2. Target Percentages Can Vary by Meal
In the same way that food cost percentage targets can vary between restaurants, they can also vary within a restaurant. This is especially true if your restaurant serves both breakfast and dinner, or you have both a coffee bar and a sit-down restaurant. Breakfast foods, like eggs and bread, are much less expensive than the seafood and high-quality meats you might serve at dinner. It’s essential to take these variations into consideration when calculating overall food cost percentage and taking inventory on your ingredient costs.
3. It’s Defined by Your Restaurant Inventory Processes
Maintaining a healthy food cost percentage requires streamlined restaurant inventory processes. Every month, you should have a beginning and starting inventory number to view and measure.
Your end-of-the-month restaurant inventory numbers help showcase which plates are bringing in the most revenue. They also allow you to address concerns quickly, if you notice that you’re losing money or that you are short on a certain ingredient. Since your restaurant inventory directly affects the price you pay for food, accurate inventory prices ensure a proper food cost percentage.
4. Your Menu Can’t Be Priced Accurately Without It
Your food cost percentage is essentially a food cost calculator. Gaining an exact projection of food costs helps you price each plate down to the last cent. This allows you to keep tabs on which ingredients are most profitable–and which ones need to be swapped out. If the price of a certain meat cut continues to fluctuate, for example, you can tweak the recipe to include a cheaper ingredient with a more consistent price. It’s also a good idea to start by pricing the menu item first. Think: what’s a realistic price that my customers would pay for a steak dinner? Then, create a recipe that fits within that budget to maximize restaurant profits.
Remember: it’s not a one and done process, either. Keeping food cost down is something all restaurant owners must asses routinely in order to run an effective and profitable establishment.