Food cost is the cost of the food ingredients used to produce the items sold by a restaurant or food business over a defined period. It is a major component of cost of goods sold and is used to evaluate menu pricing, purchasing, portion control, waste and profitability. The exact calculation depends on the accounting method and what the business includes in food cost.
At the recipe level, food cost is the total cost of the ingredients required to produce one standardized portion. Each ingredient should be costed using the actual purchase unit, usable yield and quantity used in the recipe.
Example: a burger portion uses a patty costing $2.10, a bun costing $0.40, toppings costing $0.60 and fries costing $0.50. The ingredient cost of the portion is $3.60 before packaging, labour or other operating expenses.
For a period, actual food cost is commonly calculated from opening inventory plus food purchases and transfers in, minus closing inventory and transfers out, with adjustments for the operation’s accounting method. This measures the cost of food used during the period, not simply the amount purchased.
Food cost is a dollar amount. Food cost percentage expresses that cost as a proportion of food sales. Both are useful: the dollar amount shows total ingredient consumption, while the percentage relates it to revenue.
Chef’s tip: Keep recipe costs current and measure usable yields. Supplier price changes, trim loss, over-portioning, spoilage and unrecorded staff meals can all affect the actual food cost.
Key distinction: Food cost refers to ingredient cost; it does not include every restaurant expense such as rent, utilities or all labour costs.
This term is one of hundreds covered in depth across OCS courses, learning paths, and 1-on-1 coaching with Chef Eric.
