Restaurants, caterers and other foodservice businesses use a standard food cost formula to determine their profit margin on food sales. A profitable restaurant normally has a food-cost percentage of anywhere from 28 to 35 percent.
To calculate food costs for a specific month, restaurant owners add the value of the inventory at the beginning of the month to the cost of any purchases made throughout the month. They then subtract the value of the inventory left at the end of the month to determine food costs and divide food costs by gross sales for the month to get a food cost percentage.
Food costs vary based on the type of restaurant. A fast-food or casual dining restaurant normally has a lower food-cost percentage than a fine dining establishment.