How to investigate high restaurant food cost

Calculate food used, not just food purchased

For a simplified period calculation, food used equals beginning inventory plus purchases minus ending inventory. Apply transfers and other adjustments consistently with your company’s accounting policy. Divide food used by the matching food-sales amount to calculate food-cost percentage.

In this fictional example, beginning inventory is $12,000, purchases are $38,000 and ending inventory is $10,000. Food used is $40,000. With $120,000 in food sales, food cost is 33.3%. Purchases alone would show 31.7%, hiding part of the cost.

Check that inventory counts and invoices use the same cutoff. An understated ending inventory makes calculated food cost too high. Recount unusual items before treating an accounting error as a kitchen performance problem.

Put a dollar value on the gap

If this example has a 30% target, the allowed cost at actual sales is $36,000. The $4,000 gap is the amount to explain. The target is an assumption for the exercise, not a universal standard for restaurants.

Use a consistent denominator. A kitchen food-cost ratio based on food sales will differ from one based on total sales that include beverages. Check the definition before comparing units or periods.

Test the likely drivers

Price: compare invoice unit prices for the same product, pack size and period. Mix: look for a shift toward menu items with higher ingredient costs relative to selling price. A stable menu price does not mean the sales mix is stable.

Usage: compare ingredients consumed with recipe quantities for items sold, allowing for documented yield. Waste: examine quantities and reasons by item, shift and day. An increase in recorded waste may reflect better recording, so compare it with physical usage.

Inventory: check count units, pack conversions, transfers and receiving records. Avoid adding several suspected losses together when they may describe the same missing product. Waste can already be included in an actual-versus-theoretical usage gap.

Choose a small, verifiable corrective plan

Suppose the records point to overproduction of one prepared item. A practical action is to have the chef revise that item’s prep quantity using recent sales, record what remains at close and review the quantities after a week.

Name the owner and check date. Track waste quantity alongside availability so that a reduction does not simply create stockouts. If invoice prices are the driver instead, examine the specific purchasing change rather than asking staff to cut portions without evidence.

Recheck the next period using the same definitions. Explain any remaining variance rather than declaring success because a single percentage improved.