Are You Spending Too Much on Food?
Learning How to Calculate Food Cost Percentage Could Save You a Bundle
In a time when inflation is running rampant, you want to be sure that you’re getting the best possible prices on your supplies. For food service operations, that means calculating food cost percentage and adjusting your pricing, as needed. If you can align your spend and sales, your business will grow no matter what the economic climate looks like.
How to Calculate Food Cost Percentage
First, you’ll need to make sure you’re properly calculating food cost percentage. You’ll start by adding up the money you’re spending on raw food (or cost of goods sold) for the week. That means everything from seasonings to chicken to croutons. You’ll take the price of your inventory at the beginning of the week, add in any purchases you had to make on top of that, then subtract the price of your inventory leftover at the end of the week to get cost of goods sold. Then, you’ll calculate your food sales for the week. Finally, you’ll divide your cost of goods sold by total sales. That gives you your food cost percentage.
Find Your Ideal Food Cost Percentage
The average restaurant food cost percentage is 25-40%. But it’s not one-size-fits-all. Luckily, there’s a way to calculate your ideal food cost percentage. All you have to do is divide your total cost per dish by total sales per dish for the week. You’re left with your ideal food cost percentage for that offering. This can be helpful when updating your current menu options or adding new dishes.
How to Raise Prices the Right Way
So, your operation is above the average restaurant food cost percentage or above your ideal percentage. What do you do now? You have two options. You can either find ways to reduce spend or you can raise prices.
Raising prices always comes with risk of backlash. However, there are ways you can make this change without losing your customer base. First, you’ll want to make price changes sparingly. Studies show that consumers perceive multiple price changes as more expensive than one change of the same total amount. Second, adding greater perceived value to your dishes or to the overall experience can make customers more willing to pay higher prices. This could mean adding traditionally higher-end ingredients as garnishes to existing dishes.
Cutting Down on Spend
Maybe you want to focus on reducing your operating costs. This is another great strategy for adjusting your food cost percentage. When you spend less, you won’t have to charge more. Here are a few ways to reduce costs:
Assess your potion sizes. Serving slightly smaller portions of proteins can save money over time.
Eliminate your standing orders in favor of buying only enough product to fit your current needs.
Evaluate your menu items to determine which dishes you should be pushing.
No matter how you slice it, staying up to date with the average restaurant food cost percentage is essential in inflationary periods. Reassess your menu engineering strategy today.