Alpha – Beta – Theta of Food Costing

Days have gone when we were working on experience. It's time to implement a rock-solid system that let's you make money that you've only dreamt. Do you wonder that the food you offer is great, the service is fabulous and the restaurant is busier than ever - but why the bottom line isn't all it should be?

* A very few restauranterus know the concept

* A very few restauranterus understand the concept

* A very few restauranteurs execute the concept

Be amongst the restauranteurs who execute the concept....

It's high time to check on Food Cost - A vital ratio - key to the success of any restaurant as it directly impacts profitability. A profitable restaurant typically generates a 28%-35% food cost. Joined with labor costs, these expenses consume 50%-75% of total sales. Because of the impact food cost makes on an operation, food cost is one of the first things we examine at a troubled property. Beyond the bottom line, food cost also reflects an operation's food quality, value provided to the customer, and management skill level.

Despite its importance, we find many restaurant managers do not calculate food cost correctly, or if they do, they do not fully understand the process. To be useful, food cost percentages must be determined accurately. Then the ratio can be compared to industry averages and previous performance. With an accurate food cost, steps can be taken to improve the operation and ultimately improve the bottom line.

General guidelines on Calculating Food Cost

Keeping in mind you want to eventually compare your food cost with industry averages, how you determine the numbers must be consistent with industry practices. Establish a specific time period for analysis. The food sales and costs should be generated during a set accounting time period of at least two weeks or more typically, every 28 days.

* Setup a Time Frame

* Generate Food Sales

* Generate Cost of Food Sales

* Put the numbers together

You're now ready to generate the food cost

Food Cost = Cost of Food Sales / Food Sales

Now you have the basic steps to complete your own food cost accurately and consistently with industry practices. Analyze your food cost timely and serve your guests happily :)


Nilesh Shah Over 10 years of experience in the field of software development, sales and marketing. He has assisted over 500 Retailers and Restaurateurs in implementing the Retail and F&B software with barcode & pos hardware for their business. He holds a designation of Director, Marketing in Rance Computer Pvt Ltd. He holds the certification from Microsoft Corporation and NIS. His current research focuses on developing and implementing intelligent retail systems...

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