Food cost percentage: the formula and a sensible target

The formula

Food cost % = cost of ingredients ÷ food sales × 100. Use sales before tax: GST, HST and sales tax are collected for the government, not earned. The same formula works at two sizes, and each answers a different question.

For one dish: recipe food cost

Add up what every ingredient in one serving costs, then divide by the dish’s menu price. A medium pepperoni pizza with CA$0.66 of dough, CA$0.48 of sauce, CA$2.16 of mozzarella and CA$0.80 of pepperoni costs CA$4.10 to make. At a menu price of CA$15.99, its food cost is 4.10 ÷ 15.99 × 100 = 25.6%.

This is the number you can act on dish by dish: it tells you which items to reprice, re-portion or take off the menu. The free food cost calculator does the sum for you.

For a month: actual food cost

Add up the food you used in the month and divide by the month’s food sales. With inventory counts, food used is opening stock + purchases − closing stock. Without counts, many owners use the month’s food bills instead, which is close enough when stock levels stay steady.

The monthly number is almost always higher than the recipe numbers suggest, because it includes everything recipes leave out: waste, spoilage, over-portioning, staff meals, comps and price increases nobody noticed. Tracking both, and watching the gap, is how you find where money leaks.

What is a good food cost percentage?

A common rule of thumb is 28 to 35 percent of menu price. Treat it as a starting point, not a standard: what you can afford depends on your rent, your labour and how much you sell through delivery apps.

• Pizzerias often run below that on plain and classic pizzas, because dough, sauce and cheese are inexpensive for what they sell for. Specialty pizzas with meat and premium toppings, and the largest sizes, run higher.
• Quick-service restaurants usually aim for the lower half of the range, because they also pay for packaging on most orders.
• Drinks and sides often run far lower and pull the menu’s average down, so judge mains on their own.

Set a target for each category rather than one number for the whole menu. In Mezbano, a brand sets its own levels; until it does, a dish counts as good below 30.0% and high at 35.0% or more.

Food cost and prime cost

Food and labour are a restaurant’s two largest costs you can control, and together they are called prime cost. Many owners watch it as a share of sales, because a low food cost bought with extra prep hours is no saving. Mezbano’s profit and loss shows prime cost each month and marks it from 60.0% and again from 65.0% of sales unless the brand sets other levels.

How to bring food cost down

1. Re-cost after every price change. A supplier’s increase on cheese moves the cost of almost every pizza. Costs worked out from your latest deliveries catch it the week it happens.
2. Weigh portions. A few extra grams of cheese or meat on every order is the most common leak. Put the weight in the recipe and check it on the line.
3. Price by size. Larger pizzas use more ingredients than their price step suggests; see how to cost a pizza by size.
4. Count trim and waste. Cost ingredients at their usable yield, not the weight you bought; see costing from case prices.
5. Reprice or re-engineer the worst items. Start with the dishes that sell the most and have the highest food cost. Pricing a dish from its food cost shows the formula.

How Mezbano shows it

Mezbano keeps the two numbers apart and names them. The Menu costs page shows each dish’s recipe food cost %, size by size, worked out from its published recipe and the ingredient prices in effect. The monthly profit and loss shows food cost % from the food bills you enter as expenses. Mezbano does not record inventory counts, so compare the two yourself rather than expecting a variance report.