Lightspeed is a cloud-based commerce platform powering small and medium-sized businesses in over 100 countries around the world. Perhaps he can explore partnering with cheaper vendors, reducing portion sizes or using less expensive ingredients altogether to justify lowering his burger’s menu price. Tracking inventory and the math above can be helpful in lowering food waste issues. Everything your business needs to grow, delivered straight to your inbox. This article has been viewed 1,103,124 times. Look at your sales figures to see which menu items are most popular with your clientele. You should not have any deliveries during inventory. Ideal cost is what your cost would be if you ran the perfect restaurant with no waste. Don't lessen the quality too much or you'll risk upsetting your customers and all the savings will be lost. There are two possible ways the higher price could affect sales: In this scenario, sales of the Johnny Burger have gone down since the price increased. The best way to do this is to take inventory often and minimize inventory shrinkage. If you really can’t stand to see another ad again, then please consider supporting our work with a contribution to wikiHow. We'll help you understand the purpose of calculating food cost and the steps involved. Lucky for you, we’ve got restaurant pricing down to a science. To calculate your maximum allowable food cost, subtract that amount from 100%. You should also make sure to do the same process for your drink menu. Now, just imagine if Johnny optimized the food cost percentages for each menu item, not just his burgers. For our example, we'll assume you use $1,800 worth of inventory this month. Jasper eats about 4-5 cups of food per day, and Napoleon goes through about a bag of food per month. I would never grocery shop there. Consider the actual cost per day for food. This important metric shows how much of your overall sales are spent on ingredients and food supplies. What formula can I use to calculate food cost per item? Missing this step will skew your final numbers. This article was co-authored by Jill Newman, CPA. Salaries (10%) + Hourly wages (17%) + Supplies (5%) + Utilities (6%) + Marketing (4%) + Fees and Licenses (3%) + Maintenance (4%) + Fixed Costs (21%) + Target Profit (5%) = 75%. Customers will notice if your food quality suffers and you risk losing their business as a result. This article has been viewed 1,103,124 times. In this example, 75% of your maximum budget is devoted to everything but food cost. To find your ideal food cost percentage, you first need to know two values: Total food costs; Total food sales; Let’s say their total food costs were $2,500 and, as we see above, their total food sales are $8,000. This could mean that the price is too high for customers.
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