How to Calculate Your Food Cost Percentage

Maintaining a stable food cost percentage is one of the most basic and effective ways of assisting your restaurant’s success.

Here, we’ll walk you through what a food cost percentage is, why it’s important, how to calculate it, and how it may increase your sales profit.

Simply put, food cost percentage is how much your meals cost to make compared to how much money they earn you.

You want a low food cost percentage – the lower your percentage, then usually the more profitable your meals are.

To calculate your food cost percentage, you’ll need to pick a specific period of time to measure your costs and profits. This can be the start of a new week or even a month. During this period, take note of:

Before you can calculate your food cost percentage, you need to find your Cost Of Goods Sold (COGS). For this, we’ll use the numbers we recorded above and the following formula:

(value of your starting inventory + value of any additional inventory) – value of your remaining inventory = COGS

Now that you have your COGS, you’re ready to calculate your food cost percentage with one final formula:

(total COSG / total value of your food sales) x 100 = food cost percentage

Let’s use a dummy restaurant to see the formula in action:

Bridgette’s Burgers recorded a starting inventory value of $500 at the start of the week and purchased another $1,600 worth of inventory during the week. At the end of the week, the value of the remaining inventory was $900. The profit from food sales over the course of the entire week was $3,700.

At the end of the week, the restaurant manager calculated their COGS:

(500 + 1,600) – 900 = 1,200

That means the Cost Of Goods Sold for Brigdette’s Burgers over this course of this week is $1,200.

Next, they used the Cost Of Goods Sold and value of food sales from the week to calculate their food cost percentage:

(1,200 / 3,700) x 100 = 32.43

So Bridgette’s Burgers has a food cost percentage of 32%.

You can even calculate the food cost percentage of individual meals by using a similar formula:

(total cost of dish per serving / menu price of dish) x 100 

= food cost percentage per dish

Let’s say Bridgette’s Burgers serves a $12 cheeseburger that costs $4 to make. The formula would look like this:

(4 / 12) x 100 = 33.33%

Generally, a good food cost percentage is 30%, but anywhere between 28–35% is considered normal.
It’s completely normal for your food cost percentage to fluctuate, too. If one of your suppliers raises their prices your percentage will increase. If you make your serving sizes slightly smaller, your percentage will decrease. It’s not a number you can set and forget, and we suggest that you should calculate it regularly.

There’s no one-size-fits-all solution to a high food cost percentage, but there are lots of ways you can improve it.

Raising your prices is one way, but that runs the risk of driving customers away. However, if your menu prices are especially cheap compared to your competitors, it might be a good option. Similarly, reducing your serving sizes can be an easy win but comes with some risks. That’s not to say you shouldn’t do it, but consider all your options and what your competitors are doing before making the call.

Another way is to buy less expensive (but still high-quality) ingredients. Cheaper ingredients don’t automatically mean lesser quality. Working with local suppliers may often mean paying less for shipping. Sometimes you can partner with other restaurants to place a group or bulk order. You might even be able to stay with your current supplier but negotiate a better price.

Internally, you can look for ways to cut waste. Try to plan your menu so that multiple dishes use the same ingredients, or serve meals that are made from seasonal ingredients that are more affordable at the right time of the year.

Knowing your food cost percentage gives you a better understanding of how profitable your restaurant is. Even better, it may help you pinpoint things you need to improve on or change.

For instance, if your food cost percentage is 40% it tells you that you probably need to charge more for your meals or reduce your serving sizes. But a percentage of 26% – especially for certain menu items – tells you they’re especially profitable and you should try to drive sales of those menu items to boost your overall profits.

In these cases, you can run an ads campaign in Uber Eats Manager to reach more customers. Placing an ad within the app makes your restaurant appear higher up in the feed for relevant customers, and has proven to increase orders by up to 14%.*

You could also use Uber Eats Manager to create a special offer for your high-performing menu items to drive even more sales. Choose from one of the tried-and-tested offers like “buy 1, get 1 free” and make it applicable to the menu item to incentivise customers to order it over your other, perhaps less profitable dishes.

Knowing your food cost percentage can even help you optimise your menu. If a dish has a particularly high percentage, you might want to consider changing the way you serve it to use fewer or less expensive ingredients. You might even remove it from your menu altogether.

And a low food cost percentage on certain menu items might indicate that your customers want more of these kinds of dishes. Then you can explore ways to introduce more or similar options to your menu.

Knowing how to calculate your food cost percentage is a vital skill for anyone running a restaurant, and one that may be used to increase restaurant sales. Make sure you calculate it regularly and use the results to optimise your menu. If you stay on top of it and use the results smartly, you may increase your profits and increase your restaurant’s success in the short and long term.

*Uber internal data based on performance across all restaurants in Australia and New Zealand between 1 July 2023 and 30 June 2024.