How to Calculate Your Restaurant's Food Cost (and Why It Matters)
Food cost is the percentage of your revenue you spend on ingredients. Learn how to calculate it dish by dish and across the whole month, with a step-by-step example, and find out if your restaurant is really turning a profit.
Food cost is the percentage of your revenue that you spend on ingredients. In a healthy traditional restaurant, it sits between 28% and 35%. It's one of the most important metrics in running a restaurant, and one of the most overlooked: most owners know what they bill, few know what they spend per dish. This guide shows you how to calculate food cost, dish by dish and across the whole month, with a step-by-step example.
What is food cost?
Food cost is the share of every euro you sell that goes on raw materials. The formula is simple:
Food cost (%) = (Ingredient cost ÷ Selling price) × 100
For example: if a steak dish costs you €4 in ingredients and you sell it for €16, the food cost is 25%. That means for every €16 that comes in, €4 goes to the plate and €12 is left to cover everything else: staff, rent, energy, and your margin.
What is the ideal food cost?
It depends on the type of establishment. As a reference for the Portuguese market:
| Type of establishment | Ideal food cost |
|---|---|
| Traditional restaurant | 28-35% |
| Pizzeria | 25-30% |
| Cafe / snack bar | 20-28% |
| Fine dining | 30-38% |
Above 35% in a normal operation is a warning sign: either your selling prices are too low, there is waste, or your purchasing isn't under control. Well below the range can also be a red flag, sometimes it means portions are too small or prices too high for your audience.
Theoretical food cost vs real food cost
There are two numbers with the same name, and confusing them is the most expensive mistake.
The theoretical food cost is what your dishes should cost, calculated from your recipe specs: the right ingredients and quantities for each dish, at current prices.
The real food cost is what the dishes actually cost, calculated from what left your stock: purchases and inventory movement, divided by sales.
The gap between the two is money that disappeared without ever showing up in revenue: prep waste, portions bigger than the spec, spoilage, expired product, counting errors. If the theoretical is 28% and the real is 34%, you have six percentage points leaking every month. Knowing this is the first step to stopping it.
How to calculate food cost dish by dish (step-by-step example)
For each dish you need three things: the recipe spec (ingredients and quantities), the current price of each ingredient, and the real yield (1kg of beef striploin gives about 750g once trimmed, and it's that usable weight you should cost against).
Take a steak with potatoes and vegetables, sold at €16:
| Ingredient | Quantity | Cost |
|---|---|---|
| Beef striploin (€15/kg) | 200 g | €3.00 |
| Potato (€1.20/kg) | 250 g | €0.30 |
| Side vegetables | — | €0.40 |
| Oil, salt and seasoning | — | €0.30 |
| Total dish cost | €4.00 |
Food cost = €4.00 ÷ €16.00 × 100 = 25%. This dish leaves you €12 of gross margin per sale. Repeat the exercise for your best-selling dishes and you'll know which ones are pulling your profitability up or down.
Food cost per dish vs food cost for the month
The dish-by-dish calculation gives you the theoretical food cost. For the real food cost of the business, you look at the whole month:
Monthly food cost (%) = ((Opening stock + Purchases − Closing stock) ÷ Sales) × 100
Example: you start the month with €2,000 in stock, buy €8,000 in goods, and finish with €1,500 in stock. You consumed €8,500. If you billed €28,000, your real food cost was 8,500 ÷ 28,000 = 30.4%.
You need both numbers. The dish one tells you where to adjust the menu; the monthly one tells you whether the business as a whole is within a healthy range.
The most common mistakes
- Calculating once and never updating. You do the math in January and assume it holds all year. Supplier prices change mid-month, and your margin drops without warning.
- Ignoring yield. Costing against the weight you bought rather than the usable weight hides a real part of the cost.
- Confusing theoretical with real. If you only look at the recipe spec, you never see the waste or the spoilage.
- Forgetting cash. What you pay in cash, with no invoice, is also cost of goods and has to go into the calculation.
Frequently asked questions
What is a good food cost for a restaurant? In a traditional restaurant, between 28% and 35%. It varies with the type of place: pizzerias tend to run lower, fine dining higher.
What's the difference between theoretical and real food cost? The theoretical comes from recipe specs (what dishes should cost). The real comes from stock consumed (what they actually cost). The gap is waste, spoilage, and off-spec portions.
How do I reduce food cost without losing quality? Renegotiate with suppliers using your purchase history, review portions, adjust the prices of thin-margin dishes, and tackle waste. Small tweaks to your best-selling dishes have the biggest impact.
How often should I calculate food cost? At least once a month. Ideally, keep your costs updating every time you log a new invoice, so you never sell at the wrong price.
How Tinz solves this
Tinz reads your invoices automatically (just take a photo) and updates ingredient costs in real time. Every time your meat supplier raises a price, the affected dishes are flagged, before you reach the end of the month with a surprise.
You can see the updated food cost of every dish, compare it with the previous month, and see exactly where the money is slipping away, with the theoretical and the real side by side.
Read also: Which dishes on your menu actually turn a profit and Restaurant inventory management: why it's always harder than it looks.