Long ago, I was taught that all enterprises (businesses/government/not for profit) relied on a fundamental equation for survival:
Revenues (Sales) minus Labor (payroll, benefits, payroll taxes) minus Materials (the raw product or supplies necessary) minus Capital recovery (depreciation, amortization, rent, utilities, interest, taxes) must be equal to or greater than zero
otherwise the enterprise (business/government/not for profit) will cease to exist. The three categories do not exist in isolation but are interrelated with the Materials prices being under the least control of the enterprise management. Management can control how the Materials are utilized (Labor and Capital) and which Materials are purchased as Chef EDB stated above.
Food cost (Materials) is but one of three factors that affect survival (profitability). When considering food cost percentages, i.e. Materials/Revenues * 100, IMHO it is a guideline for whomever controls the other two, Labor and Capital!
Without the ability to control Labor and Capital, there are only two avenues to reduce food costs:
- Buy cheaper food (which infers cheaper final product), or
- Minimize waste