To calculate the food cost for a restaurant, divide the total amount of money spent on food by the amount of income earned by the restaurant. Food combined with labor costs should total no more than 65 percent of costs for a profitable restaurant.
For a more in-depth analysis of food costs, calculate the cost percentage for each item on the menu. To break down food costs by individual menu items, first itemize the ingredients used in the dish, and calculate the cost of each. Add the total cost of all ingredients, and divide that number by the menu cost. This is the food cost for that individual item on the menu. Calculating this cost allows management to maintain profitable menu prices. It also allows the chef to decide which more expensive items need to be taken off the menu to maintain profitability.
Restaurant food costs are to be kept separate from labor and fixed costs, but using these numbers in conjunction paints an accurate picture of where to control costs. Each calculation needs to be done on a weekly basis to pinpoint weak areas that need to be adjusted. Recognizing problem areas early promotes financial longevity in any business, especially in a restaurant where the profit margins are usually thin.