You will need to know your food costs in order to know if your restaurant is turning a profit. This will not only help you with your profit margins, but it also helps you to come up with your menu options. Creating a menu with ingredients your customers will pay for and that your portion sizes are financially viable is key.
Let’s take a look at why you need to figure out how much your food costs, and how your Point-of-Sale (POS) system can help.
WHY YOU NEED TO CALCULATE YOUR COST OF FOOD
What you need to remember is there is a science to costing food. A profitable restaurant will spend between 28-35% of gross income on foods. With fine dining being on the hire end, and quick service on the lower side.
Giving an example is the best way to show why you need to calculate your food costs properly. Let’s say your establishment serves on average 250 customers a day, for 365 days a year. You’ve priced your popular french fries a buck too short . This miscalculation could cost you over 90K in lost revenue a year. So this is why accounting for the bread for a sandwich, or even the lettuce & tomato garnish is important because it can hurt your bottom line.
HOW TO CALCULATE YOUR FOOD COSTS
We’ve showed you why it’s important, now let’s help you calculate your food costs. The below will show you how to cost for food in general, but you need to make sure you calculate each menu item to ensure you are competitive with your pricing when building or revisiting your menu. A good Point of Sale system will allow for you to calculate your food on a per item basis.
1. If you manage the inputing of your food inventory properly from the start you should be able to easily follow through on all the below steps. A the start of the week you can see how much inventory you have in house. Then see how much food has come in from your supplier as far as costs go. A good POS can help you calculate these numbers instantly. This is way easier than manually counting every thing you have in your walk ins.
2. Your POS system will be able to share with you what you spend money on in inventory in a specific week, so pull that info up.
3. Again, lets look to your POS -check in on your total sales at the end of the week with a few easy clicks.
4. Using the below formula will help you see your food costs % for the week.
(Beginning Inventory + Purchases – Ending Inventory) ÷ Total Food Sales = Food Cost Percentage.
Although it is possible to calculate these numbers by hand, a good Point of Sale system will calculate this for you, saving you the hassle of manual calculations.
Starting Inventory $20,000
Ending Inventory $22,000
Food Sales $89000
(20000 + 5000 – 22000) ÷ 9,000 = .33 or 33%
5. Make sure to repeat this each week to figure out your actual food cost percentage.
Once you have adapted to the step-by-step system above you will be able to calculate the hard costs % of your food. Please remember that there are other costs to consider when pricing your menu like labor, rent and other overhead costs to get to your final profit.
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See you next week!
Your devoted hostess,