Culinary schools teach students how to calculate the actual cost of food in a business. However, while the math is accurate, it fails to take into account all of the factors. These factors are hurting the bottom line of restaurants everywhere. Let’s take a more in-depth look at the disconnect between percentage points and dollars.

 

Banks Only Understand Dollars

 

Students are told to use percentage points to focus on whether or not their business is profitable. However, even if on paper your percentages work for your restaurant, deli, café, etc., the bank can’t take percentage points as a deposit. Percentage points won’t pay your staff, your suppliers, or your overhead. This makes focusing on the dollar crucial despite industry standards.

 

Higher Food Cost Concerns

 

It’s common to fall into the trap of thinking higher food costs, as defined by culinary schools, relate to waste or theft. The generally accepted school of thought is that food costs should remain under 30% of the restaurant’s menu price to be successful. While the theory may hold water, let’s work through a few examples that may support some higher food costs.

 

Ideal Food Cost vs. Real Food Cost

 

When computing actual food costs, take the cost of the products needed to produce a menu item and divide it by the sales revenue. This equals the percentage of food cost. As we mentioned before, since the bank can’t work with your percentages, it makes more sense to evaluate each dish on a “cash” or “actual cost” basis. For example, suppose your restaurant offers a chicken dish for $16.00 that costs $4.50 to produce, a steak dish for $21.00 that costs $8 to make, and a surf and turf platter that sells for $31.00 and costs $13 to produce. When looking only at the percentages, or ideal food cost, your chicken dish runs 28%, the steak 38%, and the surf and turf 42%. If only looking at percentages, the chicken dish is the only one safely under the 30% recommended in school. 

 

However, doing the real food cost math has the chicken dish netting $11.50 profit, the steak $13 profit, and the surf and turf at $18 profit. The additional ideal cost may be worth it in the long run if it means a higher real food cost.

 

Reality Check

 

Your ideal cost vs. real food is worth keeping in mind. While it’s essential to look at ideal food costs over the course of a month for every dish, to have an idea of your actual cost of food in a restaurant, when you see your books and find some ideal food costs over 30%, it’s best not to worry. This could mean your higher-priced items are selling more favorably than other dishes and not be an indicator of excess food loss or theft. Besides, taking the extra profits to the bank is always a good thing!