food costing....

Food cost = the cost of food, what you actually pay for the raw food products. Generally from supplier invoices or purchasing receipts, to the best of my knowledge there is no "formula" for food costs.

Food cost as a percentage of sales (FC/Sales * 100) can be a useful management number. If it is greater than 35% for most operations, suspicions are raised that there may be too much waste or something is going out the back door. Then again, 40% or higher may be normal for that particular business model. There is no magic number to be universally applied.

As a general rule, on average, well run operations can be broken down to:

• 30-35% Food Cost
• 30-35% Labor cost
• 30-35% Overhead cost (rent, insurance, etc.)
• 0-10% Profit (generally in the neighborhood of 4-6%

The above is AVERAGE! An individual operation may vary widely!

Some, mistakenly IMHO, calculate menu prices by multiplying food cost by a factor between 2.5 to 4.0 (or dividing by .25 to .40, it comes out the same). Unless you have a firm handle on labor and overhead, that is a recipe for one of two results:

• Great volume but go out of business because there is not enough money to pay the bills, or
• No volume and go out of business because there is not enough money to pay the bills.

Your menu prices must be low enough to attract customers and high enough to cover ALL your expenses.

Your local market will determine what you may charge, and trust me, your customers have no interest in what you pay for food, labor, or overhead. They only care about whether what is on the plate seems to be a good value to them!

Figure out ALL your costs, either on a daily, weekly, monthly, or annual basis.

Divide by the number of seats in your establishment. That will give you a $/seat figure, If you use daily costs, that is the minimum $/seat you must generate to stay in business.

Now you can figure out what meal periods and how many turns per meal period it will take at an average ticket (cover) of $xx (what the local market will bear for each meal period) to cover your total costs!

Oh, you were asking for a simple formula, right? Multiply your food cost by three and pray!

Our process may not apply to your position at all, as we're a new business and you're in an established place, but...I'll share.

This has always been one of the most challenging aspects to our catering business.  It's definitely easier now than it was a year ago, but still takes a fair amount of brain power and time when putting together proposals with new items.

While we don't have an exact formula, we do use a combination of the following:

estimated food cost x a minimum of 3, but typically no higher than 4.  Although due to market conditions, some will be lower than 3,  but they're necessary items and end up as part of a package, so it should balance out.

We will consider labor-intensive items and tack on to cover that.  Those are usually higher-end items and I wouldn't be surprised if food cost was in the 12%-20% range for some of those.  We use those as an opportunity to make money.

When we've had knowledge of what the market price is, we factor that in, and typically go higher, but not so significantly for standard items that we price ourselves out.  *We don't go higher just for the sake of it; our business model has higher costs associated with the higher quality product and overall professionalism that we operate under, which are all distinctly different from our competitors.  We do cut pricing on our proposals when we need to, to an extent, so that we don't lose the potential business.

I also spent a fair amount of time online, in the early going, searching for other business's pricing to give a starting point.

I'd sure be checking trash cans and probably put a video on the back door!

Now, if you are a special place, food costs could be that high, but it would be highly unusual!
 

Sounds like you know what the problems are...and we kindof looking for confirmation from other professionals.

Yeah, 54% is um....unacceptable.  But you knew that, and you likely know where that other 15%-20% is going.

If I ever had a foodcost of  54 % I would have been fired on the spot at any place I ever worked. and the owner of the place most likely would have called the police too.

Wow, 54%...that is horrible. You guys count inventory at the end of every months I assume...right?

Another basic formula would be to take the last months inventory (beginning inventory), add all the month's food purchases, then subtract the ending inventory (current inventory) that you just counted (food cost is generally calculated at the end of the month after inventory). You take that number and divide it by the total food sales for the month. 

This is a basic, general method. It looks like this...BI=beginning inventory, CI=current inventory, P=purchases, and S=sales

(BI+P)-CI / S = FC%

There are other food costs as well, like plate cost and menu food costs, all under the umbrella of "food cost." Figuring out how much food is costing you, plus how much you should charge for it, is very important as well. 

If you know what something costs you, and you know what food cost % you want to run, then you can figure it out very similar to how chef Pete showed you. Something like this:

Cost/FC%=Menu Price

So, if your ribeye steak costs you, say, 5 dollars to put on a plate, and you know you want to run a 35% food cost on it, then:

5/.35=14.29. So you might charge 15$ for it. (this is just an example using made up numbers). 

BUT, there is a lot more to it than that, this is just basic info. Other factors include all the free stuff you give away (bread, amuse bouche, ketchup, butter, etc) and the other stuff on the plate with the steak (potatoes, vegetables, etc). The true way to do it correctly is to figure all this stuff out for all the food you cook and work from that. There are things like q factors, menu mix, and other stuff. 

Some things you can charge more for, some things you can't Making money is about utilizing product in creative ways and being smart with your menu. You have to find balance. Maybe your highest priced menu item you are forced to run close to a 40% food cost on...say a lobster of a filet mignon or something. But, you can balance it out by serving a chicken breast at like 15% food cost. The more of a product you use, the less waste you have, the more money you make. 

Say you get in whole PSMO's. You pay 80$ for it. You get 10 beautiful, 8oz filets out of it. So, essentially, those 10 steaks cost you 8$ each. You charge 28$ for it, basically a 30% FC. You make the portions absorb the cost of the PSMO, so anything else you use from the tenderloin is essentially going to be "free." If you can get some nice trimmings from the PSMO, trim all the sinew and fat, then small dice it and put beef tartare on the app menu for like 11 bucks. You pay a bit for some aioli, some crostini (made with day old bread natch), a bit of shallot, caper, egg, and EVOO. Your cost is very minimal for the tartare, since you aren't "paying" for the beef. 

Obviously, tartare isn't the only thing you could do with PSMO trim, that was just an example. Chickens are another great one...sell the supreme breasts at dinner, fried chicken thighs and drumsticks for lunch, and make stock from the carcass. Stock=soup. I mean, you COULD buy in just chicken breasts, but if you can find outlets for all the trimmings of butchering your own meat, you can save and make a lot of money. 

BUT, yeah, at 54% something is wrong. Your menu pricing is out of whack (you don't charge enough), you guys waste and/or throw away a lot of product, you aren't counting inventory correctly and/or aren't calculating your costs right, or someone is stealing from you....a lot. 

Or, you work at a country club or something, have no budget, and make the members whatever they want, whenever they want. 

Slow down everyone..

      The type of operation most often determines food cost. Example there are some upper class country clubs that are 60% however at the end of year members are assesed. So they don't worry about food cost as such. Fast food places are often 27% this is partially to do with what they are selling and the Volume of sales.. Catering only, food cost usually low because of high prices charged. Free standing rest. strives to do 33 to 35 but in many cases hit 40%. this is why it is very important to sell beverages, and why a coke or iced tea is $1.89 to 2.50 and a drink 5.50 to 7.00. Hotel food cost? usually lose money in their restaurants but make it up on banquet sales. So every type operation is different

54% is normal for a country club.

Most country clubs are not set up to show any profit from food sales like regular restaurants since they goot most of their income from membership fees. I still feel that anything over 40 % is far too high.

Not down here Kuan, we have an exra elite ??clientel

When I did CC, food cost ran around 50%.......

We run around 42% at a CC.

It helps if you have the cooks , portion and follow recipes to the tee. Pre portioning will help your food cost tremendously. And following recipes will eliminate food waste. I run 29% - 31% food cost. I hope it helps. Also double check the cooks when preparing food and make sure they are not wasting food.
 

Not in a country club you don't.  If you do you are feeding them shredded newspaper

What was the result of your issue?  I am having a similar one right now...

• 30-35% Food Cost
• 30-35% Labor cost
• 30-35% Overhead cost (rent, insurance, etc.)
• 0-10% Profit (generally in the neighborhood of 4-6%"
  
  ... if your overhead is 30-35% you'll be lucky to tread water and what's the point in that.
  
  Overhead should be in the 20s.

I’ve used spreadsheets in the past and I can tell you that they are very error prone and limited. I’ve been using CostGuard for over 6 years now and it’s great. Terrific for recipe management as well as ingredients, invoices, counts etc. Very sophisticated. Once you have your initial data entered it is very easy to use and I can import both my POS sales mix and my supplier invoices. Please don’t write off tools that will help you run a professional business. It’s more than just food cost, it’s margins and what items you sell that generate the greatest margins.

Hi Chefs ...

I am new to this website and the forum....

I am a sous chef and I would like to know more about:

1- The best ways to deal with wastage in kitchen and how to reduce it. 

2- Food costs and calculating it. 

Thanks a lot