The good news? It doesn’t have to be as daunting or complicated a task. Not when to understand how to simply the required calculations and the food controls you can implement. This guide covers these factors-and more!
Food costs are no doubt one of the biggest expenses for restaurants. Knowing and controlling these costs will impact your bottom line.
First, food costs will always be a key consideration in menu pricing. The bottom line is that you will consider food cost when determining what price to set for each menu item in order to make a margin.
Secondly, your food costs will affect your overall prime costs. Based on your food costs, you can determine whether or not you need to control other costs in order to realize a profit or achiever cost targets.
Food cost management isn’t just a timeless concern – it’s also a moving target. In 2024-2025, restaurant operators are facing a new wave of pressure points that make food cost control even more complex (and more essential):
Volatile Supplier Prices
Global supply chain instability continues to drive unpredictable price swings in core ingredients. Whether it’s due to climate events, regional logistics issues, or inflation, staying profitable means staying adaptable – tracking prices in real time and being ready to switch vendors or menu items when necessary.
Labor Shortages Affect Prep and Waste
With kitchen labor still hard to find (and keep), understaffed teams may lack the time or training to follow prep standards closely. That often leads to over-prepping, inconsistent portioning, and more spoilage – all of which erode margins. Investing in systems and simplifying recipes can help bridge that gap.
Changing Consumer Preferences
Diners are increasingly drawn to smaller portions, seasonal items, and sustainable sourcing. That’s good for storytelling, but it requires more agility in purchasing and planning. Restaurants need tools and workflows that support rapid menu adjustments while keeping costs in check.
Succinctly put, restaurant food cost is the total combined cost of a restaurant’s food. However, finding that cost is a little more complicated than that.
When restaurants talk about food cost, they’re usually talking about two types: plate cost and period cost.
Plate cost, also known as portion or recipe cost, is the total cost of a dish before margins are added. Calculating plate cost involves listing out and costing out all of the individual ingredients that go into a single dish.
Period cost, on the other hand, is the total food cost over a specific period, like a week, month, or year. In order to calculate period cost, you’ll need to use the cost of goods sold (COGS) ratio.
What Is Restaurant Food Cost Percentage?
Most restaurateurs will express plate and period costs as a percentage rather than raw numbers. This is known as a restaurant’s food cost percentage.
It’s calculated by either taking the total costs for a specific period and dividing it by the total sales for the same period (e.g., the period cost) or the cost price of a menu item and dividing it by the sales price (e.g., the plate cost) – and then multiplying the ratio by 100.
While you may want to ask competitors and other industry players about their food cost percentage, it is crucial to understand that what may be a good percentage for your restaurant may not be good for another.
In determining your best food cost percentage, have a reference maximum allowable food cost (MFC) to help you with that. This is the figure that you shouldn’t exceed in order to make a profit and meet your business goals.
Even if you’re tracking food costs regularly, small inefficiencies can quietly drain your margins. These hidden leaks are often overlooked – but once addressed, they can significantly improve profitability without cutting quality or guest experience.
1. Inaccurate Portions
The leak: Portion sizes that vary from plate to plate result in food waste, inconsistent customer experience, and margin erosion — especially for high-cost ingredients like proteins or dairy.
The fix: Use portioning tools (scales, scoops, ladles) and build standard plating guides. If you use recipe management software, make sure staff are trained on yield expectations and prep procedures.
2. Menu Engineering Fails
The leak: Top-selling dishes aren’t always your most profitable. If your “stars” are popular but low-margin, they quietly cost you over time.
The fix: Regularly run a menu analysis using contribution margin (not just popularity). Highlight dishes that are both profitable and desirable, and consider adjusting pricing or ingredients on underperforming items. Tools like MarginEdge or WISK can help automate this process.
3. Forgotten Inventory
The leak: Unused inventory hidden at the back of storage or overlooked due to poor tracking leads to spoilage, shrinkage, or redundant reordering.
The fix: Organize storage using FIFO (First In, First Out), and digitize inventory logs. Modern systems let you track stock levels in real time and alert you to overstock or slow-moving items.
4. Shrinkage & Theft
The leak: Missing product doesn’t always mean malicious theft — it can also come from improper prep, incorrect orders, or undocumented comped meals. But in aggregate, it adds up.
The fix: Track waste and comps with reason codes in your POS. Pair that with regular line checks and spot inventory counts. Creating a culture of accountability and transparency is just as important as the systems.
5. Wrong Vendor Pricing
The leak: Vendor loyalty is good — but blindly sticking with a supplier whose pricing has drifted over time can cost you thousands per year.
The fix: Monitor pricing trends across your top 20 ingredients. Negotiate regularly and don’t be afraid to price-check competitors. Some inventory platforms offer vendor comparison tools that surface price fluctuations automatically.
1. Comparison Shopping
Don’t let loyalty stand in the way of your bottom-line. Shop around, compare prices and go for vendors offering you a good price. Always track price changes so you know when to switch between vendors.
2. Stay on top of Inventory Management
How well you manage your inventory will affect your food costs, and by extension, determine your profitability. Be sure to take inventory every so often so you know exactly what you need and don’t end up under-or over-ordering. Order way more than you need and you risk the food items going bad over time, leading to food wastage. On the other hand, if you under-order, you may be forced to gap the discrepancy by buying the items you may have left out, but in this case, at a higher cost, because of the smaller quantities.
3. Reduce Food Waste
Apart from not over-ordering, you can reduce food waste by re-purposing some food items. Be creative and you will not waste. Fruits that are overripen, for example, would be great for making jams and jellies.
Also, watch your portion sizes. It will be such a waste of good food to have so many of your patrons return a big portion of their meals at the end of the meal.
4. Invest in Restaurant Food Cost Management
No doubt about it, food cost management can be quite exhausting, and complicated to say the least. The good news is that there are software solutions such as Kitchen Hub which provide data analysis tools to help you stay profitable.
Food cost management isn’t just about crunching numbers — it’s about staying sharp in a business where every margin matters. When prices shift weekly and staff bandwidth is stretched thin, even small missteps in portioning, inventory, or vendor pricing can quietly chip away at your profits.
The upside? You don’t need to rely on guesswork or outdated spreadsheets. With the right tools and a few smart adjustments, it’s possible to bring clarity to the chaos — whether that means tightening up prep routines, keeping a closer eye on supplier trends, or rethinking how your team approaches waste.
At the end of the day, managing food costs well isn’t about cutting corners — it’s about creating breathing room. The kind that lets you price with confidence, plan with intention, and focus on what matters most: serving good food and building a business that lasts.
Food cost management is particularly important during a recession or economic downturn, as many restaurant owners are finding right now. That said, food cost management can be challenging. Manual calculation can be a painstaking, time-consuming process that must be done regularly to ensure costs accurately reflect changing market rates.
