How to calculate food cost (and why yours is wrong)

Almost everyone calculates theoretical food cost: sum the ingredient cost of a recipe and divide by the selling price. Useful, but not what happens in the kitchen.

Theoretical food cost

Recipe ingredient cost ÷ net selling price. Calculate it on real yield: if filleting a fish leaves 60% of the weight, the usable ingredient costs far more than the price per kilo.

Actual food cost

(Opening stock + purchases − closing stock) ÷ revenue for the period. This is what you really pay, including waste, errors, generous portions and shrinkage.

Where margin leaks

• Portioning that changes between shifts
• Yields not updated after a supplier change
• Purchase prices changed but not pushed into recipes
• Unrecorded waste, therefore invisible
• Recipes not updated after a kitchen change

How often to recalculate

Theoretical: at every significant price change. Actual: monthly, with stocktakes always done the same way at the same moment. An inconsistent stocktake produces a useless food cost.

What to do with the result

1. Isolate your ten best sellers: that is where margin really moves
2. Compare theoretical and actual per product family, not only in total
3. Standardise portions before touching prices
4. Revisit menu engineering only once the process is stable