Q:

How do you calculate food costs?

A:

Calculate actual food cost by determining consumption over a given period of time, and then divide by total food sales over the same period. To do this, the value of the establishment's inventory must be assessed at the beginning and end of the period.

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Food cost is generally calculated on a monthly basis, but a period can be defined as whatever length of time the owner or manager deems appropriate. In order to accurately assess food cost at the end of the period, an opening and closing inventory must be taken. This should include any items which will be or could be prepared and sold to generate food revenue. Many establishments calculate food cost and alcoholic beverage cost separately, so do not include alcoholic beverages in this inventory. Furthermore, operating supplies and non-consumable items are not included in the inventory. However, consumable items that are used in the preparation of food are included, such as fryer oil.

Take inventory on the first and last day of the period. After taking the closing inventory, calculate the total food purchases during the period. If you order operating supplies such as to-go containers, paper towels or cleaning supplies from the same vendor that supplies your food, be sure to subtract the cost of these non-food items from your purchases. Add the opening inventory value to the total purchases from the month, and subtract the closing purchases from this sum. This figure represents the total consumption for the period. Calculate the total sales, taking care to exclude alcohol sales, gratuity, taxes and other non-food revenue. This represents the net food revenue for the month. Divide the consumption by the net food revenue to calculate the final cost in the form of a percentage.

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