food cost

Control points for managing food costs

By Eileen Campbell

In your operation, food cost is likely one of the highest expenses along with labour, rent and overheads. Even the slightest cost increase can “eat” into your profits.

Food cost percentage is a management tool to identify potential problems by comparing changes from one week to the next and should be calculated each accounting period to make sure your budget is on track.

Consider these typical control points if you are having issues with budgeted food cost.

  1. Standardized recipes with costings are critical to understanding menu item costs

  • Without recipes, it is all guesswork.
  • Even without a formal system, you should know the costs for each menu item based on current ingredients from supplier invoices.

         Hints on calculation of costs

  • List the ingredients of the dish, including even small amounts of seasonings and garnishes.
  • Calculate the cost of each ingredient using current invoice prices, keeping in mind the finished yield which needs to take into account reduction in weight or volume during cooking.

          Yield example

Menu item – 8 oz. portions of pulled pork from pork butts

Weight before cooking – 10 lbs, after cooking 6 lbs only, due to loss of fat and moisture during the long cooking process i.e. 60% yield.

Raw pork butt is $3/lb and after cooking $5/lb (10lbs @ $3/lb is $30; $30 divided by 6 lbs is $5/lb). Your cooked 8 oz. portions cost $2.50 to produce. Using the raw pork purchase price,                 you’d get an incorrect cost of $1.50 per portion.

  • Apply yield calculations also to large batches of soups, sauces or foods that are going to have some significant volume or weight loss during cooking (i.e. if you are reducing a sauce to 1/2 original volume, you’ve doubled the portion cost of that product).
  • Account for things like fryer oil used for deep-frying (a weekly average is likely the best way), salt and pepper and other seasonings.
  • Add the total cost of all ingredients to reach the food cost.
  • Divide the menu price by the food cost to determine the percentage of the price that comes from food to ensure you have priced the meal correctly. For example, if you sell a meal for $18 and your cost for that meal is $6, FC is 33%.
  • Every recipe should show the serving portion to ensure each chef serves the same amount at the same cost every time.
  1. Consistent portioning is critical

  • Train your employees to be familiar with portioning tools to establish the portion you have created in each recipe – scales, scoops, ladles, measuring cups and spoons are handy tools to use.
  • The slightest over-portioning will drive cost up.
  1. Establish product specifications

  • Choose adequate products for each dish – ingredients should be of a good quality and affordable to your budget. For example, do not use halibut for fish and chips if you cannot get an adequate selling price; instead consider haddock, pollock or other affordable white fish.
  • Consider joining a purchasing group which has better buying power if you are a small chain, individual restaurant or coffee shop.
  • Lock in prices by signing a contract to avoid market fluctuations.
  • In particular, review your protein and produce specifications and be careful to choose the right grade/quality for your particular uses and expected selling price.
  1. Reduce food waste

  • Measure and record what comes back from the table to determine how much food is being wasted.
  • Are your portions too large? Is the food cooked correctly so that guests don’t leave unappealing food on the plate?
  • Consider the waste that occurs when foods spoil, dishes are dropped or meals are sent back by customers and replaced.
  • Check garbage bins after food prep to ensure employees are not throwing away too many trimmings from meats and vegetables that could be used in another way.
  • Look at food waste in a new way and use items often discarded as part of your recipes. For example, Backhouse Restaurant in Niagara-on-the-Lake, Ont. makes Salsa Verde with carrot fronds and a delicious puree from leftover house- baked sour dough bread to serve with steak.

food cost

  1. Control theft of product and/or cash

  • Put controls in place so that neither employees nor customers can rip you off.
  • Who has access to the storage areas? Fridges and freezers? Is your loading dock secure with camera surveillance? Can anyone just walk in the back with no security?
  1. Implement menu engineering to influence customer behaviour

  • Increase profitability without raising prices by influencing purchase behaviour. This can be done in many ways. Examples:
  • Change menu layout. Highlight the highest-margin items on the top and bottom of your printed menu while placing the lower-margin items in the middle. Most customers tend to focus on the first and last items they see in a menu category.
  • Make meals with lower food cost sound appealing by using on-trend ingredients (e.g. vegetables as centre of the plate). Offer whole smoked or baked cauliflower/broccoli with ethnic sauces and toppings as a signature menu item that has just as much customer appeal as meat proteins.
  1. Use produce in season

  • Avoid using expensive imported out of season produce if you cannot get an adequate selling price.
  • Consider making salsas, pickles and preserves with ingredients in season and use in the off-season when produce is more expensive.
  • Replace some fresh vegetables with high quality frozen; make salsas with canned instead of fresh tomatoes.
  1. Manage inventory

  • Purchase as required and only bulk-buy where it makes sense (e.g. non-perishable items on sale).
  • Take inventory often to ensure adequate supply and control cost by reducing waste.
  • Ensure that inventory costs are up-to-date and accurate.
  • Don’t estimate inventory counts. Be precise.
  1. Establish accurate forecasting

  • Develop forecasting sheets and have each department track daily sales/usage for each menu item.
  • Use this for purchasing calculations to avoid over-buying and spoilage.
  1. Engage staff members in food cost issues

  • Inform your staff of food cost issues so they can be part of the solution, not the problem.
  • Ask them for ideas to improve.
  • Offer incentives for great ideas.
  1. Train cooking staff in preparation standards

  • Train employees in the preparation of all menu items.
  • Avoid food waste from badly prepared, overcooked food that does not make it to the plate.
  • Prevent meal returns that have to be compensated or replaced.
  1. Do more prep in house

  • Depending on your labour component, consider doing more prep in house rather than purchasing precut meats and produce.

If you already have these controls in place, congratulations! Your food cost is being well managed.

About the author:

Eileen Campbell started out as a French teacher but got side-tracked by her love of food during a sabbatical in France. Before starting Esculent Food Consulting in 2004, Eileen worked for 30+ years in the foodservice industry in a variety of roles in operations, training, marketing and culinary development. She is an award-winning recipe developer, Red Seal chef, marketing professional and culinary world traveller. She specializes in project management for a wide range of clients. She published a cookbook with Dietitians of Canada, has developed thousands of recipes and is currently at work developing global vegetarian ideas for potential clients. For more information, visit; Twitter: @EileenCampbell4.