If there's one number every food business owner should know by heart, it's their food cost percentage. This single metric tells you more about your profitability than almost any other measure—and yet many owners either don't calculate it or don't fully understand what it means.
This article is part of our comprehensive resource: The Ultimate Guide to Food Costing and Menu Pricing.
In this comprehensive guide, we'll cover everything you need to know about food cost percentage: how to calculate it, what the industry benchmarks are, and most importantly, how to improve yours.
What Is Food Cost Percentage?
Food cost percentage represents the portion of your revenue that goes toward paying for ingredients. It's expressed as a percentage of sales.
Food Cost % = (Cost of Goods Sold / Total Food Sales) x 100
For example, if your restaurant made $50,000 in food sales last month and spent $15,000 on ingredients, your food cost percentage would be:
($15,000 / $50,000) x 100 = 30%
This means 30 cents of every dollar you earn goes back to paying for food. The remaining 70 cents covers labor, rent, utilities, and (hopefully) profit.
Actual vs. Ideal Food Cost
There are actually two food cost percentages you should track:
- Actual Food CostWhat you actually spent on food divided by what you actually sold. Reflects real-world operations including waste, theft, over-portioning, and spoilage.
- Ideal (Theoretical) Food CostWhat your food cost should be if every portion was perfect and nothing was wasted. Calculate by multiplying each menu item's cost by the number sold.
Key Insight: The gap between actual and ideal food cost reveals hidden losses. A healthy gap is 1-2%. Anything above 3% signals problems with waste, theft, or portioning.
Tired of calculating food costs manually?
DishTrack automates recipe costing so you can focus on what you do best—cooking.
Industry Benchmarks: What's a Good Food Cost?
Food cost percentage varies significantly by restaurant type. Here are typical ranges:
- 28-32%Fine dining
- 28-35%Casual dining
- 30-35%Fast casual
- 25-30%Quick service
- 30-35%Catering
- 28-32%Food trucks
These aren't hard rules. A 35% food cost can be perfectly healthy if your labor costs are lower, or if you have high volume. The key is understanding how food cost fits into your overall cost structure.
Calculating Food Cost Per Dish
Beyond your overall percentage, you need to know the food cost for each individual menu item. This requires:
- List every ingredient in the recipe
- Determine the cost of each ingredient (per unit)
- Calculate the amount used in the recipe
- Multiply and sum to get total recipe cost
- Divide by portions to get cost per serving
For example, a simple pasta dish might break down like this:
- Pasta (4 oz)$0.40
- Sauce (3 oz)$0.85
- Protein (5 oz)$2.10
- Vegetables$0.55
- Garnish, oil, seasoning$0.35
- Total food cost$4.25
If this dish sells for $16, your food cost percentage for this item is 26.5%—a healthy margin.
7 Ways to Reduce Your Food Cost Percentage
- Standardize Recipes and PortionsCreate recipe cards with exact measurements. Train staff to follow them precisely. Variation in portioning is one of the biggest sources of food cost creep.
- Conduct Regular InventoryWeekly inventory helps you spot problems early. Compare what you should have used versus what you actually used.
- Negotiate with SuppliersReview supplier pricing quarterly. Get quotes from competitors. Even small savings on high-volume items add up over a year.
- Reduce WasteTrack what gets thrown away. Implement FIFO storage. Cross-utilize ingredients across multiple dishes.
- Engineer Your MenuPromote high-margin items. Remove or reprice low-margin dishes. Train servers to suggest profitable options.
- Adjust Portion SizesSometimes a slightly smaller portion still satisfies customers while improving your margins. Test carefully.
Tracking Food Cost Over Time
Calculate your food cost percentage at least monthly. Weekly is even better for identifying trends quickly. Track it alongside:
- Total revenueIs low food cost coming at the expense of sales?
- Customer countsAre you serving fewer people better, or more people worse?
- Menu mixWhich items are selling? Are they your profitable ones?
- Waste logsWhat's being thrown away, and why?
The goal isn't just hitting a number—it's understanding what drives that number so you can make informed decisions.
Summary: Your Food Cost Action Plan
Here's how to get started improving your food cost percentage:
- Calculate your current actual food cost percentage
- Calculate ideal food cost based on recipe costs and sales mix
- Identify the gap and investigate the causes
- Implement controls: standardized recipes, regular inventory, waste tracking
- Review and adjust monthly
Food cost percentage isn't just a number to report—it's a diagnostic tool that reveals how efficiently you're running your kitchen. Master it, and you'll have a clearer path to profitability.
Price Your Recipes with Confidence
DishTrack helps food businesses calculate accurate costs and set profitable prices—automatically.
Get Started FreeLearn More About Food Pricing
Explore our guides to become an expert at pricing your food products: