Restaurant Food Cost Percentage: Calculating It From Your Counts and Invoices

Your actual food cost percentage is the dollar value of the food you used in a period, divided by the food sales from that same period. You get the food you used from two full counts and the invoices in between:

Food cost ($)  = beginning inventory + food purchases − ending inventory
Food cost (%)  = food cost ($) ÷ food sales × 100

Beginning inventory is the value of your last full count. Purchases are every food invoice dated in the period, less credits. Ending inventory is the value of today's full count, and it becomes the beginning inventory for the next period.

The formula takes ten seconds. Getting numbers you can trust takes more care, because every input comes from a habit in the kitchen: whether the count is done the same way each time, whether every invoice gets entered, and whether credits get chased. This guide covers how to gather each input, how to break the number out by category, and how to choose between weekly and monthly. It also includes a worked example with all the arithmetic and the mistakes that make food cost jump around for no real reason.

In this guide

• What goes into the food cost formula
• Worked example: one week, by category
• Food cost by category
• Weekly or monthly?
• Mistakes that throw off your food cost
• Actual vs theoretical food cost
• How counts and order history feed the number
• FAQ

What goes into the food cost formula

Each of the four inputs has its own source and its own way of going wrong.

Valuing a count

A count is a list of quantities. To use it for food cost, turn each line into dollars:

Line value = quantity counted × price per count unit

The price per count unit comes from the invoice. If short rib comes 6 packages to a case at $142.00 a case and you count packages, each package is worth $142.00 ÷ 6 = $23.67. Eleven packages on the shelf are worth 11 × $23.67 = $260.37, or $260.33 if you divide at the end (11 × $142.00 ÷ 6). Either way is fine. Just do it the same way every time.

Use the most recent invoice price for each item, and update it when prices move. A count valued at last spring's prices makes ending inventory look smaller than it really is when prices have gone up, and your food cost looks worse than it is. If an item's price keeps climbing, it may be time to compare vendors.

If you count some items in a different unit than you buy them in, the conversion has to be on the count sheet. Our guide to restaurant inventory units covers how to set those up, and how to do a restaurant inventory count covers the count itself, including partial cases and opened product.

Totaling purchases

Purchases are the food invoices dated inside your period, net of credits. In practice that means:

1. Add up every food invoice from every vendor for the period, including the ones that came by text, the farmer who hands you a paper receipt, and the run to the store for lemons.
2. Take out non food lines. Broadline invoices often mix food with takeout containers, gloves, and chemicals. Track those separately.
3. Subtract credit memos for shorts, refused product, and pricing errors.

Food sales

Use the food sales line from your POS sales report for the same dates as your counts. If your POS splits food and beverage, use food only. Leave out sales tax, tips, gift card sales, and service charges, since none of those are food you sold. How discounts and comps show up varies by POS, so pick one sales figure and use the same one every period.

Worked example: one week, by category

This is an illustrative example. The restaurant, prices, and sales are made up to show the method, not to suggest a typical or target food cost.

A 70 seat neighborhood restaurant does a full count every Monday at 9:00 AM, before any trucks arrive. The week runs from Monday's count to the next Monday's count, so the sales report runs Monday through Sunday.

Step 1: total the week's food purchases

All invoices dated Monday through Sunday:      $10,205.00
Less non food lines (containers, gloves,
  sanitizer on the broadline invoice):           − $490.00
Less credit memo (refused case of fish):          − $95.00
Food purchases:  $10,205.00 − $490.00 − $95.00 = $9,620.00

Step 2: put counts and purchases side by side by category

Each row uses the same formula. For meat and seafood: $3,400 + $5,250 − $3,050 = $5,600. Check the total the same way: $7,450 + $9,620 − $6,880 = $10,190, which matches the sum of the rows ($5,600 + $2,040 + $1,150 + $1,400 = $10,190).

Step 3: divide by food sales

The POS shows $32,500 in food sales for Monday through Sunday.

Food cost %:  $10,190 ÷ $32,500 = 0.31354, or 31.4%

Step 4: look at each category's share

The rounded shares add up to 31.3%, not 31.4%. That's just rounding. Unrounded, they total 31.35%.

Notice that dairy ending inventory ($610) is higher than beginning inventory ($520). That's normal when a delivery lands right before the count or the cooler gets stocked up for a holiday. It's also why you can't use purchases alone as your food cost. This week, purchases ($9,620) were $570 lower than what the kitchen actually used ($10,190), because the shelves were drawn down by $7,450 − $6,880 = $570.

The same arithmetic works for any period. Enter your own totals, or open the category rows to see each group's share of food sales.

The same calculator is also on its own page: food cost calculator.

Food cost by category

A single food cost number tells you something moved. Categories tell you where to look.

You can calculate food used for any category as long as you count and track purchases in that category the same way. Assign each item to one category on your count sheet and in your invoice totals, and keep it there. If chicken stock base is "dry goods" one week and "meat" the next, both categories bounce.

Most POS reports don't split food sales by ingredient category, so the useful comparison is each category's share of total food sales, like the table above. Then watch the trend. If meat and seafood sits around 17% for six weeks and then jumps to 20%, start with meat and seafood invoices, counts, and portions, not the whole kitchen.

Keep the category list short. Four to six food categories is usually enough to act on. Beverages, paper, and chemicals belong in their own buckets, outside food cost.

Weekly or monthly?

Both work. They answer slightly different questions.

A middle path that a lot of kitchens use: do the full count monthly for the books, and count your most expensive category weekly. You can calculate food used for one category with only that category's counts and invoices. A weekly meat and seafood number takes a fraction of the time of a full count and covers a big share of the spend.

Whatever you pick, count at the same time of day, at the same point in the delivery cycle, every period. A count before the Monday truck and a count after it aren't measuring the same thing.

Mistakes that throw off your food cost

Using the week above, here's how much each of these common mistakes would move the result.

A missing invoice

The produce vendor's $412 invoice stays on the clipboard by the back door and never gets entered.

Food used:   $10,190 − $412 = $9,778
Food cost:   $9,778 ÷ $32,500 = 30.1%   (instead of 31.4%)

The produce is still gone from the shelf, so the ending count doesn't change. The week looks better than it was. Then, if the invoice gets entered next week, next week looks $412 worse. That pattern of one good week followed by one bad week is often a sign of invoices landing in the wrong period.

This is the mistake an order log helps you catch. If every order is written down, you can check that every order in the period has a matching invoice. Our guide to tracking restaurant purchase orders shows how to set one up.

Counting in one unit and pricing in another

Someone counts 11 packages of short rib but the sheet prices the line per case, so 11 gets multiplied by $142.00.

What it was valued at:   11 × $142.00 = $1,562.00
What it's worth:         11 × $142.00 ÷ 6 = $260.33
Overstated by:           $1,562.00 − $260.33 = $1,301.67

Food used:   $10,190 − $1,301.67 = $8,888.33
Food cost:   $8,888.33 ÷ $32,500 = 27.3%

One line is off and the whole week looks four points better. Every line on the count sheet should state its count unit, and the price column should be in that same unit.

Credits that never get applied

The $95 credit for the refused fish comes in two weeks late, after the books for that week are done, and nobody applies it anywhere.

Food used:   $10,190 + $95 = $10,285
Food cost:   $10,285 ÷ $32,500 = 31.6%

Small, but credits add up, and an uncollected credit is money you actually lost. Pick a rule and stick to it. Either hold the period open until credits are in, or apply each credit memo in the period you receive it.

Counting a delivery without its invoice (or the reverse)

Say the Monday meat truck shows up early, gets put away at 8:30, and is counted at 9:00 as ending inventory for the week you're closing. Its invoice is dated Monday, so it goes in next week's purchases. Ending inventory now includes meat that never shows up in this week's purchases, so this week's food cost comes out too low and next week's comes out too high.

The fix is a simple cutoff rule. Count before the day's deliveries arrive, and put any invoice dated on the count day in the new period. If a truck does beat the count, either leave that product out of the count or move its invoice into the period you're closing. Do one or the other, never both.

Transfers to the bar or another location

The bar pulls lemons, limes, cream, and juice from the kitchen all week. Those were bought as food, but they're sold as drinks. Say they come to $180 for the week:

Food used without the transfer:   $10,190
Food used after the transfer:     $10,190 − $180 = $10,010
Food cost:                        $10,010 ÷ $32,500 = 30.8%

Keep a simple transfer sheet: date, item, quantity, value, and where it went. Subtract transfers out of food and add them to wherever they went, whether that's the bar or another location. The same goes for product you send to a sister restaurant.

Treating waste as a separate problem

Waste, spoilage, and over portioning are already in your actual food cost. If it left the shelf and wasn't on the next count, the formula counted it as used. That's the point of measuring actual food cost. A waste log doesn't change the number, but it explains part of it, which is why it's worth keeping one.

Staff meals and comps work the same way. Unless you track them and take them out, they're inside the number. Decide with your accountant whether to track them separately, then handle them the same way every period.

Actual vs theoretical food cost

Everything above is actual food cost: what the counts and invoices say you used.

Theoretical food cost is what you should have used, based on what you sold. You get it by multiplying each menu item's recipe cost by how many of that item you sold, from your POS product mix report, then dividing by food sales. It needs costed recipes for every dish, so it's a bigger project. For anything you trim or portion, those recipe costs should use the cost per usable pound from a yield test, not the invoice price.

The gap between the two is where waste, over portioning, theft, missed invoices, and counting errors show up. You can't size that gap until your actual number is reliable, so get the counts and invoices right first. To trace a gap one item at a time, see our guide to finding where missing inventory went.

How counts and order history feed the number

Food cost is the last step of a loop you're already running for ordering. When the earlier steps are solid, the calculation is mostly addition.

• Consistent counts give you inventory values. Same walk order, same units, same time of day. A count sheet built around your shelves does most of this work.
• An order guide gives you current prices. If your order guide has the latest price for each item, valuing a count is one multiplication per line.
• A purchase order log gives you a checklist of invoices. Every order placed in the period should have an invoice in the period's purchases. Any order still waiting on a credit is a reminder to adjust purchases.
• Vendor schedules make timing predictable. If you know which trucks arrive on which days, you can pick a count time that falls before deliveries every week.

If you already run purchasing from a spreadsheet, a food cost tab is a natural addition. It just needs to pull category totals from your count tab and your invoice totals. Our guide to setting up a restaurant purchasing spreadsheet covers the tabs it would draw from.

Where Proteus Kitchen fits

Proteus Kitchen doesn't calculate food cost percentage, and it doesn't connect to your POS, so food sales still come from your POS reports and purchases still come from your invoices. What it does is keep the records the calculation depends on in one place. Each inventory item has its vendor, category, storage location, order unit, and, if you count it differently, its count unit and conversion. Your purchase orders and purchasing history live there too, and you can filter past orders by vendor, status, and date range when you're checking that every order in a period has an invoice.

FAQ

What's a good food cost percentage?

It depends on your menu, prices, and concept, so a number that's healthy for one restaurant can be a problem for another. The more useful comparison is against your own trend, counted the same way each period, and eventually against your theoretical food cost.

Is food cost the same as cost of goods sold?

Food cost is usually the food part of cost of goods sold. Many restaurants also calculate beverage cost the same way, with its own counts, purchases, and sales, and report the two separately. Your accountant can tell you how your books group them.

Can I just use purchases instead of counting?

Purchases divided by sales gives you a rough spending ratio, but it isn't food cost. It ignores whether your shelves got fuller or emptier during the period. In the example above, purchases were $570 less than what the kitchen actually used. Over a long period the difference shrinks, but week to week it can be large.

Do paper goods and cleaning supplies go in food cost?

Usually not. Track them as their own categories so they don't hide changes in your actual food spending. Whatever you decide, keep them out of both your counts and your food purchases, or include them in both.

Why did my food cost jump this week when nothing changed?

Check the process before the kitchen. The most common causes are an invoice entered in the wrong week, a count done after a delivery instead of before, a unit mix up on one expensive line, or a credit that hasn't been applied. If the next week swings back the other way by about the same amount, timing is the likely cause.

How long does a full count take?

That depends on the size of your storage and how well your count sheet matches it. The first few counts are slow. Once the sheet follows the shelves and everyone counts in the same units, it gets faster. Splitting the sheet by storage area between two people helps too.

Next step: run it for one period

1. Pick your period and your count time, before deliveries.
2. Do a full count, value it, and write down the total. That's your beginning inventory.
3. Collect every food invoice and credit memo dated until the next count.
4. Do the next full count at the same time of day and value it the same way.
5. Pull food sales for exactly those dates and run the formula, first in total and then by category.

The first number is a baseline. The second and third are where it starts telling you something. If your item list, vendors, and order guide still live in a spreadsheet, Free Restaurant Setup covers bringing them into Proteus.