12/29/2023 0 Comments Average inventory formula restaurantKeep in mind that the food cost formula does not calculate the total profit margin for your menu. Food Cost Percentage versus Gross Profit Margin As the prices of certain products rise, you can make adjustments with more cost-effective substitutes. At least once per year, run the formula on each ingredient of your signature or high selling dishes. The food cost formula is also an effective way to find potential savings on your menu items. Track your weekly inventory and purchases so those numbers are available when you’re ready to use the food cost formula. However, due to fluctuating wholesale food prices, it’s recommended to run your food cost formula at least once per month to effectively budget for your business. It’s up to you and your operator to determine a frequency that works best for your business When it comes to how often you should run the food cost formula for your restaurant, you can run the numbers every week, month, or year. No matter what kind of restaurant you’re operating, having a good handle on your food cost formula is essential to managing your budget. For example, a high-end steakhouse could see food costs up to 40%. However, your percentage could vary depending on the type of restaurant you’re running.Ī quick service or fast food establishment usually keeps its food costs on the lower end of the spectrum. Now that you know how to run a food cost formula, what percentage should you be aiming for?Ī quick Internet search will tell you that the average food cost should be 25% to 30% for most restaurants. Fortunately, the details are easily obtained by tracking food orders and inventory. It may seem like a lot of information that you have to plug in. Usage Amount/Food Sales Revenue = Costs of Goods Sold (%) Opening Inventory Value + Cost of Purchases – Closing Inventory Value = Usage Amount Once you have those details, use the following food cost formula to calculate your food cost percentage: Food Sales Revenue: How much food your restaurant has sold in the past week.Closing inventory Value:The value of what is still in stock at the end of the week.Cost of Purchases: The dollar value of items or ingredients you’ve purchased throughout the week.Opening Inventory Value: The value of physical inventory in stock at the beginning of the week.The beverage and food cost formula is also a useful tool for your kitchen manager to make orders and stock inventory without going over budget.Ĭalculating your beverage food cost formula is easy and can be recorded anywhere from a bar napkin to a spreadsheet (although we don’t recommend the bar napkin approach).Ī quick note, we’ll be referencing food cost throughout this blog, but you can apply all formulas and tactics to beverages as well!įirst, gather the information you’re going to need for the food cost formula. Read on to figure out how the food cost calculator works!Ĭombined with these 11 menu pricing strategies, figuring out your food and beverage cost percentage empowers you strategically price your items and set a healthy margin.
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