Your business can thrive or suffer based on how you price the dishes on your restaurant's menu. If you set a high price for a dish, customers may opt not to order it.
Conversely, should you undervalue a dish significantly, generating sufficient revenue to cover expenses becomes far-fetched?
Fortunately, we have grasped the science of restaurant pricing. Getting the best culinary experience in the world of hospitality is an exciting journey. Yet, successful navigation demands understanding your establishment's food and beverage costs. To run a successful restaurant, one must do more than merely create delectable dishes.
An acute understanding of the numbers behind the scenes is equally important. Let us explore its definition and present methods for calculating it while underlining strategies to control this critical element.
Our aim? To increase your restaurant's profitability amidst a fiercely competitive culinary landscape.
In this blog, we will walk you through how to find the following and use it to set menu prices:
1. What is food cost
2. How to calculate food cost
3. What is the food cost formula
4. How to calculate food cost for a recipe
5. How cost per recipe works
6. Food cost percentage explained
7. How to control food cost
8. Takeaway
A systematic approach is necessary for accurately calculating the food and beverage cost. Equally crucial, one must incorporate supplementary outlays like labour and overheads. Detailed execution of every calculation stands imperative.
To calculate the Food Cost Percentage, utilise the equation (Cost of Goods Sold divided by Total Revenue) multiplied by 100.
What equips us to determine the FC percentage?
● It is the cornerstone of economic control for any restaurant.
● It is an incredible tool for evaluating the financial health of your establishment.
To calculate food and beverage costs, use the formula:
To determine the food cost of a specific dish, one must ascertain both the quantity and cost of each ingredient used in that particular recipe. Calculating the food and beverage cost for a specific recipe is important for menu optimisation becomes extremely easy with a food costing calculator. Begin by identifying all ingredients involved and assigning an expense corresponding to their purchase price.
This calculation involves: listing all ingredients, determining their quantities, and assigning costs per unit or weight. The summation of these individual expenses aids in acquiring a total recipe cost. To guarantee that each item on your menu enhances your overall profit margins, one must undertake an exhaustive process:
Harry, the owner of Harry's Hearty Pies, is eager to examine the price per serving for his iconic Hearty Pie. This delectable masterpiece comprises 8 ounces of seasoned minced beef, 1 puff pastry crust, 1 tablespoon of rich gravy, a handful of diced potatoes, 1 diced carrot, and a pinch of herbs.
Procuring his ingredients in bulk, Harry spends £14 on 5 kilograms of seasoned minced beef. Upon conducting the numbers, he establishes that an eight-ounce portion of minced beef for a singular pie inflicts an expense of £1.12 upon his establishment. He follows with similar calculations to ascertain the cost per serving for other components.
To craft the Hearty Pie, the employment of ingredients incurs a total cost of £3.17 per serving. By understanding how much it costs Harry to make each pie, he can set competitive prices while making a profit.
For a restaurant to be profitable, food and beverage costs should be kept between 28 and 35% of revenue. Let us see how he would calculate the food and beverage cost percentage with the given data:
The food and beverage cost percentage of Harry's Hearty Pies stands at 63.6%, implying that their ingredient costs consume 63.6% of all revenues generated. Harry might want to consider adjusting his menu prices to maximise the financial performance of his pie shop.
Effective control over food costs is the key to surviving and generating profit in the competitive restaurant industry. It can be easily accomplished by regular reviews of supplier agreements, and efficient inventory management that minimises waste. Even judicious use of ingredients by training kitchen and bar staff appropriately, and strategic adjustment of menu prices based on market trends. Effective strategies include:
Though it may appear burdensome, meticulous control over your restaurant's food and beverage cost percentages guarantees financial stability. It ensures bill payments gets you enough profit from each sale. In an industry characterised by infamously slim profit margins, the value of every cent intensifies a factor not to be overlooked.
Here is a small recap of the blog:
● Decide your food and beverage cost per serving for each menu item separately.
● Calculate your current food cost percentage.
● Revise menu items to fit your ideal FC percentage.
● Monitor how sales react to those adjustments.
● Look at alternatives to lower food and beverage costs.
Once you finalise the menu prices, recheck your menu design to choose different layouts. Surprisingly, there is a correlation between an increased sale and an efficiently designed menu.
Understanding the science of calculating food and beverage costs is important for achieving success in the culinary world. Restaurateurs can strike an impeccable balance between creative culinary expression and economic diplomacy by implementing effective strategies.
How can technology streamline food and beverage cost management? STO offers real-time reporting insights into inventory.
The evolving culinary landscape necessitates advanced tools, to which StockTake Online responds with a tailored and modern solution. Our software provides the restaurant industry with real-time reports that help restaurateurs to accurately measure stock levels. It helps reduce wastage which makes it sustainable.
By investing in technology that works neck to neck with your inventory management practices, you are investing in your restaurant's future. This indicates a commitment to sustainability, efficiency, and innovation. We even have free to use food and beverage cost calculator that can make the entire calculating process simple for you.