The food cost percentage calculator may sound like an alien term to most outside the restaurant industry, but for restaurateurs, it is an important metric. Food cost percentage calculator is the ratio between ingredients and the revenue those ingredients generate when sold.
What is the food cost percentage calculator?
One thing that does not go well in the restaurant industry is guessing. You definitely cannot put an X amount on a product based on assumption, for even a dollar lost on one item can lead to huge losses in the long run. This is when the food cost percentage calculator comes into practice. It gives you the precise amount that you should be charging for the items on your menu.
How to calculate food cost percentage?
The calculation is simple
Food Cost Percentage = (Beginning Inventory Value + Purchases Ending Inventory)/ Total Food Sales
So, to get the food cost percentage you need to first calculate the value of the inventory at the start of the week. Any commodity that comes in later mid-week -- will be a part of the purchases and what's left at the end of the week is your ending inventory. You take these figures and divide them with your total sales figure for that week. This is when you will have an exact food cost percentage in place.
What is the ideal food cost percentage?: Ideal Food Cost = Recipe Cost /Recipe Sales
The formula is simple, you put together your recipe cost and divide it by your recipe sales and that will give you the ideal food cost.
How much does your food cost?
Zip Inventory’s food cost percentage calculator will tell you how much your food costs based on USDA standards
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Why is the food cost percentage calculator so important?
The prices of food items do not and cannot stay consistent for a long period. In circumstances like the pandemic, the prices can go high and in such a situation the restaurants need to revise their menu prices. But one can review and revise the price only with the help of a reliable metric A food cost percentage calculator.
If you are still unsure of its importance let us give you some figures - according to a National Restaurant Association survey, 91% of restaurant operators paid more for their food, and 85% made smaller profit margins post Covid-19 outbreak. Undoubtedly, the pandemic hit the restaurant industry, with the food price going high and many items going off shelves, but this could have been managed better with the food cost percentage calculator in place.
What is a good food cost percentage?
28 to 32 % is considered a good food percentage for restaurants. If your restaurant is not meeting this number, don't panic! You can work towards this with a few easy amendments that are mentioned below.
How to improve your food cost percentage?
Here are a few points that can help you improve your food percentage-
You want to make sure you’re not throwing money away on food that isn’t going to go towards your bottom line
Zip Inventory’s food cost percentage calculator is a quick and easy way to calculate the monthly cost of different foods
Online employee scheduling software that makes shift planning effortless. Try it free for 14 days.
Review and revise menu price-
There can be times when an item on the menu is sold for a lesser price than its actual food cost. This is something that the owner and the manager of the eatery need to take care of and revise the price on the menu with the help of a food cost percentage calculator.
Use food with more profit and less investment-
Filling your menu with expensive food items can lead to lesser sales and profit margins. On the contrary, adding food with lesser investments can give you better profits. So, you need to be mindful while selecting your menu.
Shop from wholesalers-
If you plan your week's inventory it will give you the time to pick your food items from a wholesaler. Moving from your neighboring shop to a wholesaler will mean saving more on your food costs. This will lead to more profit margins, as your food cost will be lesser, than the final product on your menu.
Reduce portion sizes-
Go more artistic with your presentation and reduce the portion size. Everyone likes a well-decorated plate with food that fills the tummy just right! If you are serving customers that are price sensitive, increasing your menu price wouldn't be the best option. In such a case you can bring down the portion size a bit, to continue with the existing price. This will bring you happy customers and decrease your Food Cost .
Highlight the bestsellers-
You always know what sells the most at your restaurant, keeping such an item at the end of your meu wouldn't be the best choice. You can bring it in the front or add tickers like bestsellers or kitchen's special. These tricks will decrease your Food Cost and increase sales.
Invest in technology-
Manually entering the information can be chaotic and time-consuming, but technology can make this job easy. You can invest in Zip Inventory an inventory management tool that can streamline it all for your business and deliver the desired results with a food cost calculator .
What to do before you start food costing?
In any business, you need to work backward before you move forward and the same applies in the restaurant business. You just can't start food costing without actually knowing your restaurant's budget.
So, how can you go about budgeting?
Track numbers-
Know the ratio between your sales and cost.
Define your accounting period-
Every business has its accounting period. For most restaurants, it's four weeks, but you can select the time frame that works best for you.
Set targets-
You must set a budget target as that will give you a clear view of the path that you are planning to move on.
Keep it small-
When you set goals for your restaurant you can consider a bigger time frame, but to achieve them you need to go small. Keeping a tab on your weekly expense and profit will give you a clear picture of what's working in your favor and what's not. If you wait to do the calculations after a year, it may be a bit late.
