Guide · Hospitality costing
The formula fits on one line. The hard part is the three numbers that go into it — that is where most kitchens lose their accuracy.
Food cost is the cost of the ingredients consumed in a period, as a percentage of the food sales of the same period. Every amount goes in net of VAT.
Cost of food consumed = Opening stock + Net purchases − Closing stock
Food cost % = Cost of food consumed ÷ Net food sales × 100
| Opening stock (stocktake 31/8) | €6,200.00 |
| + Purchases for the month (supplier invoices, net) | €18,400.00 |
| − Credit notes (returns, discounts) | −€400.00 |
| − Closing stock (stocktake 30/9) | −€5,700.00 |
| = Cost of food consumed | €18,500.00 |
| Net food sales (excluding VAT) | €56,000.00 |
| Food cost = 18,500 ÷ 56,000 | 33.0% |
The amounts are illustrative. The calculation is the same for every kitchen.
The formula is only as right as the weakest of its four numbers. Each one has a single correct source.
The valuation of the previous month's closing stocktake. If no stocktake was done then, there is no correct opening stock — and no correct food cost for the month that follows.
Every food supplier invoice for the period at net value, less credit notes. Each invoice exactly once: not twice (a delivery note and an invoice for the same delivery), and not zero times.
The stocktake at the end of the period, valued at the price you actually paid — usually the weighted average price — not at list price, and not at zero for items that have no price.
From your till or POS, excluding VAT. If you track drinks separately as beverage cost, drink sales stay out — and so do drink purchases.
fnb.utilize.gr supplies the whole cost side: net purchases per site, line by line from the invoices and after credit notes, and stocktakes valued at the average price you actually paid. Sales come from your till — we are not a POS.
What your sales should have cost if every dish had been made exactly to its recipe: recipe cost × portions sold. It needs costed recipes and sales per dish.
What they cost in practice: stocktakes and purchase invoices, using the formula above. It shows what happened, not what was planned.
The gap between the two is the most useful number in the kitchen. A steady gap is your normal waste. A gap that suddenly widens means something specific: over-portioning, food thrown away, comps that were never rung up, theft — or a supplier price that went up and never made it into the recipe.
Theoretical food cost needs a recipe-costing tool, which fnb.utilize.gr is not. It does need correct purchase prices as its input, though, and those it supplies.
It is almost never the formula. It is one of the numbers that went into it.
1
A delivery note and an invoice for the same delivery, or the same document entered by two people. An invoice is identified by its number, the supplier's VAT number and its date — the number alone is not enough.
2
A delivery on the 30th with an invoice that arrives on the 5th of the next month: the goods are in the stocktake, the purchase is not. One month comes out artificially cheap and the next artificially expensive.
3
Purchases including VAT and sales excluding it, or the reverse, distort the percentage by the difference between the rates. Both sides always net.
4
Returns and discounts not deducted from purchases inflate the cost by their value.
5
Valuing at list price, at last year's price, or at zero for items with no price. The correct price is what you actually paid — typically the weighted average price for the period.
6
Counting in units and valuing per case, or adding kilos and units into one total. One unit error on one expensive item is enough to spoil the whole month.
7
When the central store or one site passes ingredients to another without recording it, one looks cheap and the other expensive — and neither number is true.
Food cost is calculated in two steps. First the cost of food consumed: opening stock + net purchases for the period − closing stock. Then the percentage: cost of food consumed ÷ net food sales × 100. For example, opening stock of €6,200, purchases of €18,000 after credit notes and closing stock of €5,700 give a cost of food consumed of €18,500; with net food sales of €56,000, food cost is 33.0%.
Food cost is calculated without VAT, on both sides: purchases at net value and sales net as well. If one side includes VAT and the other does not, the percentage is distorted by the difference between the rates — and in hospitality, food, drinks and sales do not all carry the same rate.
There is no single right food cost percentage for every restaurant. It depends on the menu, the ingredients, the concept and the pricing policy: a fish taverna and a pizzeria have completely different numbers and can both be healthy. The most useful yardstick is your own theoretical food cost and the trend of your actual food cost month by month; a sudden change tells you more than any industry average.
Theoretical food cost is what should result if every dish had been made exactly to its recipe: recipe cost × portions sold. Actual food cost comes from stocktakes and purchase invoices. The gap between them points to waste, over-portioning, unrecorded comps, theft, or supplier prices that rose without the recipe being updated.
Food cost without a stocktake is only an approximation. Without one, the calculation becomes simply purchases ÷ sales, which only holds if stock was the same at the start and the end of the period. In practice it is not: a month with a large order looks expensive and the next one cheap. An actual food cost needs a stocktake at least at every month-end.
Food cost should be calculated at least once a month, at month-end, with a full stocktake. Many kitchens also count the few expensive items — meat, fish, spirits — every week, since they drive most of the cost, so that a problem is caught before the month closes.
Credit notes are deducted from the purchases of the period in which they were issued. A credit note for returned goods or for a discount reduces the cost of food consumed by its net value. If they are forgotten, food cost comes out higher than it really is.
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