How to Find Your Ideal Food Cost
Knowing your ideal food cost is important because it’s one of the numbers that helps you calculate your target food cost. Your ideal food is what your food cost should be if your ran a perfect restaurant, where there is no theft, no waste, no spoilage. To find this number, you need accurate, up-to-date recipe costing cards and your menu mix from your POS system, which tells you what your customers actually ordered. Since a perfect restaurant doesn’t exist, this number is referred to as an ideal or theoretical number.
Let me put it to you this way, menu mix is critical to finding out where your food cost should be in your restaurant, not based on a national average. Understanding menu mix and its effects on your overall food cost is what allows you to sell a frozen high cost appetizer at a 38 percent food cost out of a box and into the fryer because you sell the living heck out of your fresh hand cut French fries at a 5 percent food cost.
I like to simplify this with this example. Let’s say you have a menu with only two items. You sell one item at a 1 percent food cost and you sell the second item at a 99 percent food cost. Now imagine in a calendar month you sell 100 total items and 99 of them are at a 1 percent food cost and the other one is at a 99 percent food cost. What do you think your food cost would be? It’s 1 percent, right? Selling only one item at a higher food cost isn’t going to move the needle. Now let’s reverse that and say you sold 100 items, of which 99 items were at a 99 percent food cost and the other one at a 1 percent food cost. What do you think your food cost would be? It’s 99 percent, right? Selling one item at 1 percent food cost, again, will not move the needle.
The ONLY way to know where your food cost should be based on what your customers order is to have the following information:
- Accurate, up-to-date recipe costing cards for EVERY item you sell.
- A menu price for each item you sell, before any discounts are applied. Again, this is referred to as the gross sale price.
- Last, but not least, you need your product mix from your POS system, often referred to as an item-by-item sales report, sales mix report or a velocity report. It’s just a listing of how many you sold of each item you sell.
Once you have all this data, you simply total up all the product used and divide it by the gross sales. This will give you your ideal food cost. Since we are not robots and don’t run perfect restaurants when it comes to food preparation, I would give your kitchen manager or chef 1.5–2 additional points over ideal as a food cost target they should be hitting. If you needed to hit a 25 percent food cost to achieve a 55 percent prime cost, then based on your current menu and customer ordering habits, you need to hit an ideal food cost of 23 percent or less.
If you would like to learn more about ideal food cost, read our free special report, Breaking Away from the Insanity: How to easily take control of your restaurant and make more money. Download it here. Be sure to visit our YouTube channel for more helpful restaurant management video tips.