In our last article we determined our food yields for numerous items as the first step in generating food cost. Today, we will put the calculations together to formulate the cost for a menu item. You can then replicate this across all of your menu items to determine your ideal food cost.
I say ideal food cost as this number will
assume that there is no waste, no theft, and that there is consistent and exact preparation every time. While we can’t ever guarantee those things, your ideal food cost will help you determine which menu items are your greatest money makers and which you should look at removing from your menu.
From Recipe To Food Cost
Before you start, you will need a recipe for each item on your menu.
Once you have the recipe, you will need to calculate the yields for each ingredient that is part of your recipes. As mentioned in the last article, this process will take time, however finding out your ideal food costs can be one of the most beneficial practices you can do for your restaurant. It literally helps to determine whether or not you are making enough money on your food to keep you in business.
You can download this food cost form as a guide to help you with your calculations or you can create your own sheet.
On the top of the sheet enter the menu item such as Bacon Cheeseburger and a description for later clarity. On the left hand side list each ingredient with one ingredient on each line.
Next, for each item enter the quantity, unit, cost per unit, and yield percentage. Use your distributor invoices to determine your cost per unit. See our last article if you need help determining food product yields. Then, you will multiply your units times your ‘cost per unit’ and then multiply that by your ‘product yield’. This will give you your total cost for that ingredient in this menu item. If you have our food cost form, it will calculate this number for you.
You will do this for all of the ingredients and then add all of the ingredient costs together to get your ‘total adjusted cost’ for the menu item. This is what it ideally costs you to make the menu item. You can subtract that from your sale price to determine your profit in dollars. Or, if you’d rather the percentage, divide the ‘Total Adjusted Cost’ by the ‘Sale Price’. Again, if you are using the form we provided this will calculate for you if you enter your sale price from your menu.
Don’t Mix Up Your Units
As a caution, be sure that you do not mix up your units. It can be easy to put in ‘2 each’ for cheese slices and then enter the cost per pound. Make sure your units are consistent. If you calculated the weight of a unit when determining your yield percentages, you can use that. You will notice on the example sheet that I gave a bit more information in the item description. Signifying slices, leaves, or scoops can help keep things in line. A manager looking at the sheet may not know 1 oz of cheese at your restaurant is a slice, so clarifying that may help, just don’t mix up weights with eaches. There is also a section at the bottom for additional notes if an extended explanation is needed.
Don’t Mix Up Case Cost With Unit Cost
Another common mistake is not adjusting for how many units are in a case and entering the case price. Obviously, these types of mistakes will seriously affect your numbers so keep it the same unit across each line item. See the example form to get a visual of a complete food cost form.
Digital and Print
I would recommend having both a digital and a printed copy. The digital copy will allow you to calculated costs more quickly. However, print off a copy when you are finished. You don’t want to have a hard drive failure and lose all of your costs and have to do this extensive process again.
If you are not sure what to put in the notes section you can leave it blank. However, a helpful item may be to list the current per pound prices for market volatile items with a date to recheck the costs. Many ingredient prices can fluctuate wildly depending if they are in season or not. Anticipating price hikes in advance can save you a lot of money and help keep your number in line.
This Is Ideal Not Actual
As mentioned above, the cost and percentage you calculated is ideal cost not actual. It doesn’t account for market price changes, waste through mistakes, theft, or spoilage. You should be able to compare these numbers to the reports you get from your point of sale system to calculate how close you are to ideal.
It takes a lot of work to calculate your proper food cost. Use the food cost form to help you with the calculations. If you need further help, contact us here at Coppertie and we can get you setup, walk you through the process, or even do everything for you.
Calculating your food cost is worth the effort it takes. By knowing your ideal costs you are able to more appropriately spot theft and waste, accentuate big money makers, design similar profitable items, reduce costs, and make more money. It can be the difference between success and failure.