Restaurant food cost: how to calculate and keep it under control

What is food cost and why it determines the restaurant's margin

Food cost is the percentage impact of raw material costs on the selling price of a dish (or the entire menu). It's not a bookkeeping detail to leave to your accountant at year-end: it's the most direct lever a restaurateur has to protect margins, because unlike rent or labor costs, it can be corrected dish by dish, recipe by recipe, almost in real time.

A food cost that is too high does not automatically mean "prices that are too low": it often means outdated recipes, kitchen waste, or portions that have grown over time without the dish price ever being adjusted.

The formula for calculating food cost

The basic formula is simple: Food Cost % = (Ingredient cost ÷ Taxable selling price) × 100. The selling price to use is always net of VAT, otherwise the calculation will be understated.

Example: a beef steak costs €5.20 in raw materials (meat, side dish, seasonings) and is sold at €18 (taxable). The food cost is (5.20 ÷ 18) × 100 = 28.9%, in line with industry benchmarks.

For recipe cost, it is good practice to add a waste/scrap allowance of 5-10% above the theoretical cost of ingredients: trimming, cooking, and actual yield are always lower than the gross weight purchased.