Divide your cost of goods sold by your food sales, then multiply by 100. If your COGS is $12,500 and your food sales are $40,000, your food cost percentage is 31.25%.

The formula itself is simple. Where most restaurant owners get it wrong is calculating cost of goods sold. Using your total food purchases for the period isn’t accurate because it doesn’t account for what you actually used versus what’s still sitting in your walk-in.

The correct way to calculate COGS is beginning inventory plus purchases minus ending inventory. Start with the dollar value of food on hand at the beginning of the period. Add everything you purchased during that period. Subtract what’s still on hand at the end. The difference is what you actually used.

Here’s an example. You start the month with $4,000 in inventory. You buy $12,000 in food during the month. You end with $3,500 in inventory. Your cost of goods sold is $4,000 plus $12,000 minus $3,500, which equals $12,500. Against $40,000 in food sales, that’s a 31.25% food cost.

Industry benchmarks vary by concept. Full-service restaurants typically target 28% to 35%. Fast casual usually runs 25% to 32%. Fine dining might accept 35% to 40% because higher quality ingredients justify higher prices. These are guidelines, not absolutes. A pizza shop might run 25% while a farm-to-table concept runs 38% and both are profitable if their pricing matches.

Calculate this at least monthly, though weekly gives you faster feedback when something goes wrong. A sudden jump usually points to waste, portion creep, vendor price increases you missed, or theft. You can’t fix a problem you don’t see until it’s already eaten your margins for months.

What throws off the number most often is sloppy inventory counts, waste that isn’t tracked, staff meals and comps that aren’t recorded separately, and inconsistent portioning. If your cooks are eyeballing portions instead of using scales or portion scoops, your theoretical food cost and actual food cost will never match.

Per-item food cost matters too. Add up every ingredient in a dish and divide by the menu price. You might find your best-selling item has terrible margins while something that barely sells is your most profitable. That’s useful information when you’re deciding what to promote or what prices need adjusting.

Getting accurate food cost numbers requires accurate books. If purchases aren’t categorized correctly or inventory counts are rushed guesswork, the percentage you calculate won’t mean much. Bookkeeping services in Richmond that understand restaurant operations can help you set up systems that make this tracking reliable instead of a monthly headache.