Why You Need to Learn to Calculate Food Cost
Where does the money go? Isn’t that the most common question you ask yourself at the end of the month when you go through your bills?
Whether you are opening a restaurant, running a food stall, or simply trying to control your household expenses, learning how to calculate food cost (how to calculate food cost) can help you:
Reduce waste and know how much each ingredient is worth so you don’t just throw away things that look edible.
Accurate pricing, if you sell food and can’t calculate the cost, you’ll either lose money or scare away customers.
Optimize purchasing, find out that it turns out to be a better deal to buy potatoes than sweet potatoes, and you’ll be in the clear next time you shop.
Today, we will use the simplest method, hand in hand to teach you to calculate every penny!
How do you really calculate food costs?
Method 1: Calculate the cost of a single serving of a dish
Suitable for: home cooking, food stalls, restaurants single product pricing
Formula: Cost per serving = total cost of ingredients ÷ number of servings made.
An example:
You cooked a pot of tomato beef noodles and used:
Beef 20 RMB
5 for tomatoes
Noodles 3 yuan
Seasoning 2 yuan
Total cost = 20 + 5 + 3 + 2 = $30
If this pot of noodles serves 3 bowls, then the cost per bowl is: 30 ÷ 3 = $10 per bowl
Tip:
If certain seasonings (e.g. salt, oil) are used in small quantities, you can spread the cost out evenly on a monthly basis and don’t have to count each time.
Electricity and gas costs can be roughly added by 10-20% if you want to include them.
Method 2: Food Cost Percentage Method
Suitable for: restaurants, cafes and other operators who need to control profits
Formula: Percentage of food cost = (total cost of ingredients ÷ selling price of dishes) × 100%.
Let’s take another example:
You sell a cup of milk tea:
Ingredient cost (milk, tea, sugar, pearls) = 5 yuan
Selling price = 20 yuan
Then the percentage of food cost is: (5 ÷ 20) × 100% = 25
Industry reference value:
Fast food restaurant: 25%-35
Upscale restaurant: 28%-35
Café: 20%-30
If your costs are too high compared to your peers, it’s either time to raise prices or change suppliers!
Advanced Tip: How can I reduce my food costs?
- Figuring out the cost is just the first step, the real masters will find ways to save money!
Buy in bulk, but don’t stock up
Rice, oil, canned goods and other storage-resistant ingredients, you can take advantage of discounts to buy more.
But vegetables, fresh meat do not hoard too much, put bad instead of waste. - Don’t waste the trimmings
Carrot head, celery leaves? Use them to make soup!
Leftover bread? Make bread pudding or toast crunch! - Keep track of “wastage”
Some vegetables shrink when you wash and cut them (e.g. spinach is half cooked). Record the actual usable portion so that you can be more accurate next time you buy.
Are you getting your food costs right?
Let’s do an exercise
Scenario: You have a fried chicken restaurant, a fried chicken package contains:
Chicken leg 1 (purchase price of 3 yuan)
50g of French fries (purchase price $1)
Coke 1 cup (purchase price 2 yuan)
Packaging box 0.5 yuan
Question: What is the total cost of ingredients for this package?
If you sell it for $15, what is the percentage of food cost?
What should the selling price be if you want to keep the cost at 25%?
Answer: Total cost = 3 + 1 + 2 + 0.5 = $6.5
Percent of cost = (6.5 ÷ 15) × 100% ≈ 43.3% (too high!)
Ideal selling price = 6.5 ÷ 25% = $26 (or cut costs, e.g., switch to cheaper packaging)
To summarize: count the cost and eat smarter!
Whether you’re a family diner, a restaurateur, or a budget-conscious eater, learning how to calculate food cost (HOW TO CALCULATE FOOD COST) will allow you to:
Eat more frugally and stop inexplicably overspending.
Make more money – if you’re in business, cost control = higher profits.
Waste less, which is kind to your wallet and the planet!