A food cost calculator is an essential tool for you to manage your restaurant business. You can anticipate precise costs
per plate for new menu items and price each dish accordingly. You can keep accurate track of inventory and manage the
overall expenses of your foodservice operation.

Insight into food costs helps ensure you reach maximum profitability. Services like Sourcery can help with tools like
alerts about changes in vendor price costs. That way, you have a heads up when you need to make adjustments. Here’s
all the math you need to do to stay on top of your food cost accounting.

Importance of Food Cost Calculations

Tracking all food costs down to the cent gives you the agility to make decisions about your menu. You can identify
dishes with higher margins and promote them. You can eliminate the “dead weight” from your offerings by getting rid
of dishes that sell only infrequently and cost more to produce than they are worth.

Tracking food costs lets you see how much money you lose due to waste or theft. You can see this figure by comparing
your ideal food costs to your actual food costs. Without doing these calculations, it is challenging to see what is reducing
your profitability. Your restaurant accounting will, in fact, include a few different calculations, all of which are important
to your operations.

Calculating Recipe and Sub Recipe Cost

Your recipe cost is the cost of the ingredients for each serving of a dish. Sometimes it is easier to calculate the recipe
cost for multiple servings, then divide that cost by the number of servings. Sourcery’s example uses the ingredient cost
of four servings of cheeseburger and fries. You can download that spreadsheet here:

RECIPE COST CALCULATOR

In the Sourcery example, the calculations look like this:

Burgers (4 servings)

• 2 pounds of ground beef = $7.60
• 4 buns = $1.00
• 0.5 pounds cheese slice = $2.00
• 0.5 pounds lettuce = $0.21
• 0.75 pounds tomato = $1.50
• 4 ounces mustard = $0.40
• 12 ounces ketchup = $1.20
• 2 pounds of french fries = $3.00
• Total (4 servings) = $16.91
• Cost per serving = $4.23

In some cases, you may also have a sub recipe. For example, you may make a pasta dish with a homemade sauce. Your
recipe cost for the pasta dish will include the sub recipe cost for the sauce.

In order to arrive at a menu price, you can add up the ingredient cost, overhead cost, waste cost, and profit. Your waste
cost is the percentage difference between your ideal food costs and actual food costs, which we discuss below.

This may sound fine and dandy — but let’s look again at that “ingredient cost.” To make sure you have all of the
information you need, the ideal calculation is to use the plate cost instead of the ingredient cost. That’s in order to
decide on a menu price that takes everything into account and gives you enough profit margin.

Using this method, the calculation would be plate cost, overhead cost, waste cost, and profit to determine menu price.

Calculating Plate Cost

Many food entrepreneurs calculate the plate cost in addition to the recipe costs. Every food item that you place in front
of customers costs you money, and should show up on your food cost calculations. For example, the cheeseburger and
fries may come with a side order of cole slaw.

Therefore, you have to add in the cost of one serving of cole slaw when you determine how much you spend on each
order of cheeseburger and fries. As a general rule, your plate cost is the recipe cost for the main dish plus any sides.

This may sound confusing, but there’s an easy way to look at it. For each plate, simply ask yourself what on the plate
costs you money. You need to account for all of those items before you arrive at a menu cost.

Sample Spreadsheet: Plate Cost

On the attached spreadsheet, you can see how the plate cost goes up for the cheeseburger and fries item when you
include the side order of cole slaw. At an estimated cost of $1.00 for 4 servings of cole slaw, the per serving plate cost
rises from $4.23 to $4.48. Remember, this figure does not include the waste cost or your profit margin.

• Recipe cost (4 servings) = $16.91
• Additional plate items (4 servings) = $1.00
• Total plate cost (4 servings) = $16.91 + $1.00 = $17.91
• Plate cost per serving: $17.91 / 4 = $4.48

Calculating Ideal Food Cost and Actual Food Cost

To get insight into waste and theft — in other words, the amount of food that you are buying, but doesn’t end up on a
customer’s plate.

Your ideal food cost is the total cost divided by the total sales. For example, if you sold $15,000 in one week, and your
calculated costs for those plates (excluding waste) was $3,750, then your ideal food cost is $3,750 divided by $15,000,
or 25 percent. That looks like this:

• Sales: $15,000
• Plate Costs: $3,750
• Ideal food cost percentage: $3,750 / $15,000 = 0.25 or 25 percent

Your actual food cost is how much you actually spent. You can arrive at this figure using your beginning and ending
food inventory and your total sales for the period. The basic formula for actual food cost percentage is: (starting
inventory + purchases – ending inventory) ÷ food sales.

So, in the above example, let’s say your starting inventory was $20,000 and you made $5,000 in purchases. Your ending
inventory was $20,000. Your food cost percentage would be $5,000 divided by $15,000 or 33 percent. Put more simply,
the calculation looks like this:

• Starting inventory: $20,000
• Purchases: $5,000
• Total: $20,000 + $5,000 = $25,000
• Ending inventory: $20,000
• Food cost: $25,000 – $20,000 = $5,000
• Food cost percentage: $5,000 / $15,000 = 0.33 or 33 percent

That’s a difference of about 8 percent between your ideal and your actual food costs.

Remember when we calculated plate costs, we included waste? You can figure out how much waste adds to the cost of
your dish by comparing your ideal and actual food costs. In this example, the recipe cost calculation would have a waste
value of 8 percent of the cost of the ingredients.

Managing Food Inventory

With this insight into each menu item, you can make better buying decisions. You always want to keep popular items on
the menu. So knowing how much to charge gives you the flexibility to make incremental price increases that maintain
your sales volume but also increase your profit.

These calculations allow you to create precise shopping lists. You can bring in only the amount of food inventory you
are going to use, so it’s not lost to waste. This keeps your costs down and helps you run a more lean operation.

Using Sourcery for Cost Monitoring

Regardless of your diligence in calculating and tracking costs, there are going to be circumstances out of your control.
Your vendors may increase their prices without warning, leading to a ripple effect within your own business. Knowing
what you spend already helps you to better manage these occurrences.

Sourcery alerts you to price increases so you can get ahead of changes in your food costs. That’s just one way Sourcery
can bring ease and efficiency to your restaurant accounting. If you want to learn more about how Sourcery can help
you, contact us today.