Food Cost Variance

Food cost variance is the difference between a restaurant’s actual food cost and its theoretical food cost for the same period. The variance helps identify where purchasing, inventory, recipe execution or recording practices are causing actual ingredient usage to differ from the amount expected from sales and standard recipes.

Theoretical versus actual food cost

• Theoretical food cost: the ingredient cost that should have been used based on sales mix, standard recipes, portion sizes and current ingredient costs.
• Actual food cost: the cost of food consumed during the period, generally calculated from opening inventory plus purchases and transfers in, less closing inventory and transfers out, with adjustments for the operation’s accounting method.

Worked example

If theoretical food cost is 28% of net food sales and actual food cost is 32%, the variance is 4 percentage points unfavourable. On $50,000 of net food sales, that difference represents $2,000 of additional food cost relative to the theoretical result.

Common causes

• Over-portioning or inconsistent recipe execution.
• Unrecorded waste, spoilage, staff meals or complimentary items.
• Incorrect inventory counts or invoice coding.
• Unrecorded transfers between locations or departments.
• Supplier price changes not reflected in recipe costing.
• Sales modifiers, voids or comps not mapped correctly to recipes.

Chef’s tip: Investigate the variance by product, recipe and station. Check inventory accuracy and sales mapping before assuming theft or poor performance. A single percentage target is not appropriate for every concept; establish a baseline from reliable data.

Key distinction: Food cost variance compares actual with theoretical cost. Food-cost percentage compares food cost with sales.