Working out restaurant food cost

Actual food cost measures the value of food used during a period. Theoretical food cost estimates what the dishes sold should have used at the recorded recipe quantities and ingredient costs. Comparing the two helps an owner decide where to investigate a stock or portion difference.

Use the same outlet, dates and food sales basis for both calculations. Keep tax treatment consistent with your accounts. Do not compare food ingredients with total takings that also include unrelated sales. The examples below use made-up figures to show the arithmetic.

Start with the physical stock count

For a simple outlet with no stock transfers or purchase returns, food used equals opening food stock plus purchases minus closing food stock. Value each part on a consistent basis. A count in kilograms and a purchase recorded in cases need a reliable conversion before they can be compared.

In this example, opening stock is ₹600, purchases are ₹900 and closing stock is ₹300. Food used is ₹600 + ₹900 − ₹300 = ₹1,200. If food sales excluding GST are ₹4,000, actual food cost is ₹1,200 ÷ ₹4,000 × 100 = 30%.

Where there are transfers, add stock received and subtract stock sent out. Subtract purchase returns too. Count usable prepared food as well as raw ingredients, using a consistent valuation method. Otherwise a batch of gravy can disappear from the count even though it is still available for tomorrow’s service.

Cost the portion you actually serve

Theoretical cost starts with a written recipe and a defined portion. Include the ingredients used in the dish, including cooking oil and garnish. For prepared components, cost the batch and divide by its usable yield. A purchase weight and an edible portion weight are not always the same.

In this example, a dish uses ingredients costing ₹180 for one portion and sells for ₹600 excluding GST. Its theoretical food cost is ₹180 ÷ ₹600 × 100 = 30%. That percentage describes this example only. Rent, labour and other operating expenses have not been deducted, so it is not a profit margin.

For a period, multiply each dish’s recipe cost by the number sold and add the results. Divide that total by the corresponding food sales, then multiply by 100. Do not take a simple average of dish percentages. A dish sold once should not carry the same weight as one sold throughout the day.

Explain the gap before changing portions

Suppose, in the first example, the recipes for the dishes sold total ₹1,080. Theoretical food cost is ₹1,080 ÷ ₹4,000 × 100 = 27%. Actual cost is ₹120 higher, a gap of three percentage points. Those figures measure the difference. The checks below look for its cause.

Look for missing receipts or a stock count taken while deliveries were still being put away. Check waste records and staff meals. A recipe may use an old purchase cost, or the ladle at the pass may hold more than the recipe allows. Recount a suspect ingredient before blaming the kitchen.

Record how you treat staff meals and wastage so the next period uses the same basis. Change one confirmed issue, then compare another complete period rather than treating a single day’s result as a settled trend.

Maharaj Inventory is an add-on with recipes, stock counts and actual and theoretical food cost reports. Only dishes linked to a recipe deduct stock when ordered. We’re onboarding restaurants in small batches. Bring a recipe and a supplier invoice to a demo to check fit.