Food Cost Percentage
The share of food sales spent on the food that was used: (beginning inventory + purchases − ending inventory) divided by net food sales.
Food cost percentage measures how much of every food sales dollar goes to ingredients. For a period it is the cost of food used, found from inventory counts and purchases, divided by net food sales. For a single dish it is the recipe cost divided by the menu price.
It is usually compared with a theoretical figure calculated from recipes and the items sold. The gap between the two shows food that was used but not sold: waste, over-portioning, spoilage, mistakes and theft. Beverage cost is tracked separately.
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There are two versions, and comparing them is where most of the value is. The first tells you what your food actually cost. The second tells you what it should have cost.
Use the same period for both, and count inventory on the same day and in the same way each time. Food and beverage should be tracked separately, because their cost structures differ, and non-food supplies such as napkins and takeout containers belong in a different line.
Worked example: one month at a restaurant
A restaurant starts the month with $14,000 of food inventory, buys $31,000 of food during the month, and finishes with $13,000. Food sales are $96,000.
| Line | Amount |
|---|---|
| Beginning inventory | $14,000 |
| Purchases | $31,000 |
| Ending inventory | ($13,000) |
| Food cost (cost of goods sold) | $32,000 |
| Food sales | $96,000 |
| Actual food cost percentage | 33.3% |
Now compare it with the recipe view. The point-of-sale report shows what was sold, and the recipe cards say the food in those dishes should have cost $29,500. The theoretical food cost percentage is $29,500 ÷ $96,000 = 30.7%.
The gap is 2.6 percentage points, or $2,500 in one month: $32,000 actual minus $29,500 theoretical. Over a year that is about $30,000 of food that was bought but did not turn into a sold dish. Neither number alone reveals it. The actual figure of 33.3% might look acceptable on its own, and the 30.7% theoretical figure describes an ideal that the kitchen doesn't reach.
What is a good food cost percentage?
A widely quoted target range for restaurants is 28% to 35%. Toast, citing National Restaurant Association data covering over 900 establishments, reports median food cost of about 32% for full-service restaurants and 32.4% for limited-service ones. Treat those as landmarks rather than goals.
The right number for you depends on your concept and pricing. A steakhouse with expensive proteins and a pizzeria with cheap dough and cheese will land in different places and can both be profitable. What matters more is whether the number fits your other costs. Food cost and labor together (prime cost) have to leave room for rent, utilities and profit. Our food cost percentage benchmarks guide breaks down ranges by restaurant type, and prime cost shows how to combine it with labor.
Pricing a dish to hit a target
An entrée costs $5.40 in ingredients. To hit 30%, the price is $5.40 ÷ 0.30 = $18.00. At a 28% target it is $19.29, and at 32% it is $16.88. A couple of points of target changes the price by about $2.40, which is why the target is a decision and not a rounding.
Pricing every dish to the same percentage is a mistake. A dish that costs $2.00 to make and sells at 30% earns $4.67 of gross profit, while a $9.00 dish at the same 30% earns $21.00. Guests choose based on price and perception, so cheap dishes can carry a lower percentage, and premium proteins may need a higher one. The menu price calculator does the arithmetic for a full menu, and menu engineering explains how to decide which dishes to feature.
Why actual food cost drifts above theoretical
When actual exceeds theoretical, the number alone doesn't say why. These are the usual causes, roughly in the order worth checking:
- Waste and spoilage. Prep trim, over-ordering and product that expires before it sells. Track it in a waste log instead of guessing.
- Portioning. Oversizing every component of a $5.40 plate by 10% adds about $0.54 per plate, and the excess is invisible unless someone weighs it.
- Unrecorded usage. Staff meals, comps, remakes and tastings all use food that no sale records.
- Outdated recipe costs. If the theoretical number uses last season's prices, it is too low. Update it when supplier prices change.
- Yield errors. Recipe costs based on purchase weight rather than usable weight understate cost. See edible portion cost.
- Counting errors and timing. A miscounted walk-in or an invoice booked in the wrong month moves the percentage without any real change.
Sales mix is a cause that isn't a problem. If guests order more steak and less pasta in a month, food cost rises even with perfect portioning, because steak carries a higher cost percentage. That is why the comparison should use the theoretical cost from the same period's sales, not a fixed target percentage. A rise in both numbers together points to mix or supplier prices, while a widening gap between them points to waste, portioning or unrecorded usage.
Edible portion cost is the fix for the yield item. A product bought at $3.20 a pound with 72% usable yield costs $3.20 ÷ 0.72 = $4.44 per usable pound. A recipe built on the $3.20 price understates the true cost of that ingredient by 28%.
How to reduce food cost without hurting quality
- Cost every recipe. Start with your top sellers. The recipe cost calculator and recipe costing entry show the method.
- Count inventory weekly, not monthly. Frequent counts show a problem while you can still find the cause.
- Standardize portions. Use scoops, scales and portion guides on the highest-cost items first.
- Review supplier prices on your top ten items. A 5% increase on a large item can move the whole percentage.
- Reprice or redesign the weak dishes. A dish with high cost and low sales is a candidate for a new recipe, a smaller portion or removal.
Cost cuts that guests can see, such as smaller portions across the board or lower-quality ingredients, tend to lose sales. Waste, portioning and pricing are safer places to look first.
Common mistakes
- Using purchases as cost. Purchases without the inventory change misstate cost, especially in a month when you stocked up.
- Mixing food and beverage. Beverage runs at a different percentage. Blended numbers hide problems in both.
- Comparing across periods of different lengths. A four-week and a five-week period aren't comparable. Use consistent accounting periods.
- Ignoring sales mix. If guests order more high-cost dishes, food cost rises even with perfect execution.
- Chasing a single target number. A lower percentage isn't always better. Cutting food quality to hit 28% can reduce sales more than it saves.
What food cost percentage can't tell you
It doesn't include labor, rent or overhead, so a restaurant can hit its target and still lose money. Percentage also hides dollars: a 30% cost on a $30 dish is $9, while 30% on a $10 dish is $3, and the first earns more gross profit per plate. Use it alongside dollar margin and prime cost. To run your own numbers, use the food cost percentage calculator.
Frequently asked questions
Food cost percentage is the share of food sales that goes to the cost of the food. If the food cost is $32,000 on $96,000 of food sales, food cost percentage is 33.3%.
Add beginning inventory and purchases, subtract ending inventory to get food cost, then divide by food sales. For a single dish, divide the ingredient cost by the menu price. A $5.40 plate that sells for $18.00 is 30%.
A commonly cited range is 28% to 35%. Toast, citing National Restaurant Association data, reports medians of roughly 32% for both full-service and limited-service restaurants. The right target depends on your menu and how prices, labor and rent fit together.
Actual food cost comes from inventory and purchases and shows what you really spent. Theoretical food cost comes from recipes and sales and shows what you should have spent. The gap between them measures waste, over-portioning and unrecorded usage.
Common causes are waste, oversized portions, unrecorded staff meals and comps, outdated recipe costs, and counting errors. Compare actual with theoretical to see whether the gap is in your kitchen or in your data.
Divide the plate cost by the target percentage. At a 30% target, a dish costing $5.40 is priced at $18.00. Check the result against local prices and the dish's dollar margin.
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