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Calculating Basic Food Costs

Excellence in the culinary arts is just one of the many skills needed to be successful in the foodservice industry, financial skills is another! The i
© International Culinary Studio

Introduction

Controlling food costs is imperative in the restaurant business. If costs are not controlled successfully, no matter how good your food may be or how many loyal customers you have, your business cannot survive.

Excellence in the culinary arts is just one of the many skills needed to be successful in the foodservice industry, financial skills is another! The importance of recipe costing cannot be overlooked.

Recipe costing is the basis of good food cost control.

The following are some basic formulas and tips to achieving a profitable bottom-line.

Food Cost Percentage (FC %)

The percentage of the selling prices that pays for the ingredients. The formula for the food cost percentage is as follows:

Beginning inventory + purchases - ending inventory all divided by food sales

Determining Food Cost percentage per portion

To calculate the food cost percentage of a single item on the menu the formula is:

Cost per portion divided by portion selling price all multiplied by 100

Example: The cost per portion of a main menu item is $4.62, and you are charging $21.00 per serving.

The food cost percentage calculation is as follows:

Example calculation using above formula

This indicates that 22% of the sales of your main menu item pays for ingredients used to make the dish.

The other 78% accounts for the other expenses the operation incurs in making the menu item – labour, utilities, rent etc. The amount that remains after your expenses have been paid becomes your profit.

You can also look at food cost as it relates to a currency for example: If a recipe has a 40% food cost, then the food cost is $0.40 for each $1.00 of sales.

Tip: The food cost percentage for an operation is extremely important. It is one of the tools used by successful managers to evaluate profitability and menu items. Food cost for individual recipes, we cover menu profitability evaluation in our Menu Engineering Short Course.

Costing a recipe

Before you can determine the selling price of a dish you need calculate the cost of the recipe and then each portion of the recipe.

Cost per Portion: Total recipe cost divided by the number of portions.

Example: The total cost of a given entrée on your menu is $28.56 and you are yielding 8 portions per recipe. The cost per portion calculation is as follows:

Cost per Portion: $28.56 divided by 8 = $3.57 The cost per portion is then used to calculate the selling prices based on a desired food cost percentage. We will discuss selling price in the next activity.

You will recall we discussed standardised recipes earlier in the course. Instead of manually costing each recipe, technology now enables us to pull the latest inventory prices into a standardised recipe and have the cost at our fingertips.

Standardised recipe with costing

Some terms that you will come across in a standardised recipe are:

Menu item: the name of the recipe identified as accurately as possible, using a menu number if necessary.

Date: the day, month, and year the cost was calculated. this can be important for later analysis.

Number of portions: the number of portions the recipe makes or yields.

Size: the portion size normally served. this applies to menu items and is generally given in the recipe; it is not calculated.

Cost per portion: the cost of each serving. it is the total recipe cost divided by the number of portions.

Selling price: based on the food cost percentage allowed by the budget. it is the cost per portion divided by the food cost percentage (in decimal form).

Food cost %: an expression of food cost in relation to the selling price. it is the cost per portion divided by the selling price.

Ingredients: all the food items that make up the recipe, including specific sizes or id numbers.

Recipe quantity: this will be listed by weight, volume, or count depending on the recipe. the recipe quantity is usually the edible portion quantity with some exceptions. Recipe quantity is recorded in one of three ways:

  1. Weight (pounds, ounces, grams, etc.)
  2. Volume (cups, pints, tablespoons etc.)
  3. Count (each, bunch, case, etc.)

APC/unit: the amount-purchased cost per unit is the current market price or the amount-purchased price, and the unit upon which price is based.

Yield %: many foods are not purchased already cleaned, and with these, some waste (trim) is expected. the yield percentage is used to adjust the amount-purchased cost to compensate for trim loss.

EPC/unit: Edible portion cost per unit is the cost per unit of the fabricated fruit or vegetable. This cost accounts not only for the cost of the fabricated product but also for the trim loss. This is calculated by dividing the APC by the yield percentage.

Total cost: the total cost of each ingredient used.

Total recipe cost: the sum of all items in the total cost column. This represents the total estimated cost of the recipe.

The following is an example of a standardised recipe with costing:

Example of standardised menu costing

Example of standardised menu costing

In our next activity we you will get a chance to practice calculating food costs.

© International Culinary Studio
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