How to Calculate Food Cost Percentage: A Step-by-Step Guide for Operators

Food cost percentage is one of the most important financial metrics for any restaurant or hospitality business. It reveals how efficiently you manage inventory, purchase ingredients, and price your menu. Yet, many operators struggle to calculate it accurately or to take action on the results.

In this guide, we’ll explain how to calculate food cost percentage, how to interpret it, and how StockTake Online’s AI-powered tools including our new AI Invoice Scanning feature help operators maintain optimal margins.

What Is Food Cost Percentage?

Food cost percentage represents the proportion of your revenue spent on food ingredients. It is calculated using the formula:

(Cost of Goods Sold ÷ Total Food Sales) × 100

For example, if your restaurant spends £10,000 on ingredients and generates £30,000 in food sales in a month, your food cost percentage is:

(£10,000 ÷ £30,000) × 100 = 33%

Why It Matters

A high food cost percentage can erode profitability, while a very low percentage may indicate overpricing or portion inconsistencies. Most restaurants aim for a food cost percentage between 28% and 35%, depending on their concept and market.

Step-by-Step Food Cost Calculation

1. Track Beginning Inventory
   Record the value of all food inventory at the start of the period.
2. Add Purchases
   Include the cost of all food purchased during the period.
3. Subtract Ending Inventory
   Count and value the remaining food inventory at the end of the period.
4. Calculate Cost of Goods Sold (COGS)
   Beginning Inventory + Purchases – Ending Inventory = COGS.
5. Apply the Formula
   Divide COGS by Total Food Sales and multiply by 100.

The Role of AI in Food Cost Control

Manual calculations are time-consuming and prone to human error. Stocktake Online’s AI Invoice Scanning feature automates invoice processing by instantly reading item names, quantities, and prices even if invoices are received in different formats or contain last-minute changes

Benefits include:

• Instant Processing: Upload or photograph invoices for automatic cost updates.
  
• Price Alerts: Receive notifications on unexplained supplier price changes.
  
• Timely Inventory Adjustments: Inventory levels update in real time.
  

Read the full blog on AI Invoice Scanning for Restaurants to learn how this feature transforms back-of-house operations.

Optimising Food Cost with Stocktake Online

Stocktake Online’s hospitality stock control software provides tools for recipe costing, waste tracking, and supplier management. Operators can:

• Monitor live inventory levels across multiple locations.
  
• Track ingredient yields and allergen compliance.
  
• Generate automated reports for sales, variance, and gross profit.
  

These capabilities allow precise cost management and immediate corrective actions.

Tips to Reduce Food Cost Percentage

1. Standardise Recipes – Use our recipe management software to set accurate portion sizes.
   
2. Leverage Supplier Analytics – Negotiate better pricing based on historical purchase data.
   
3. Track Waste in Real Time – Identify and reduce food waste to protect margins.
   
4. Automate Stock Control – Our cloud-based system eliminates manual counts and errors.
   
   

Q&A

Q1: What is a good food cost percentage for restaurants?
Between 28% and 35%, depending on cuisine, location, and service model.

Q2: How do you calculate food cost percentage?
Divide the cost of goods sold by total food sales and multiply by 100.

Q3: How can AI help reduce food costs?
AI invoice scanning updates inventory instantly and flags price changes to prevent overspending.

Ready to cut costs and increase profits?

Book a Free Demo of StockTake Online today to see how our AI-powered stock control software helps you calculate food cost percentages, reduce waste, and optimise operations across the UK, Europe, GCC, and beyond.

About Stocktake Online

Stocktake Online is a global leader in hospitality inventory management software, trusted by thousands of operators worldwide.

With over a decade of industry expertise and a 4.7+ star rating, the platform helps restaurants, hotels, bars, cafés, catering companies, and cloud kitchens streamline stock control, reduce waste, and drive profitability.

The software combines AI-powered invoice scanning, menu and recipe costing, multi-site tracking, procurement automation, and supplier integrations into one cloud-based system.

Operating across the UK, Europe, GCC, North America, and Australasia, Stocktake Online continues to innovate with sustainable, data-driven solutions that empower operators to take back control of costs.

Learn more about our services.