The document is a comprehensive guide on managing restaurant food costs, defining food cost as the expense of raw materials used to prepare dishes, ideally ranging between 30-40% of menu prices. It outlines methods for calculating food costs, factors affecting them, and strategic tips for managing costs effectively through menu engineering, standard recipes, yield management, and inventory control. Additionally, it emphasizes the importance of reporting and analysis for informed decision-making in restaurant operations.

1. A complete guide on
Restaurant Food Costs
Valuable insights on managing your food costs

2. What are restaurant food costs ?
 Simply put, food cost is the cost of all the raw materials used
in preparing a dish.
 Food costs are calculated as a percentage of the total volume
of sales.
 Ideally, the food cost should be between 30-40% of the menu
price.
 For example :- If your food cost is 40%, that means you spent
0.4 Rupees for every Rupee you took in sales.

3. How to calculate food costs?(Single Dish)
 List down the ingredients used in the dish even the small ones
like cooking oil, garnishes, etc.
 Calculate the cost of each ingredient. For example :- If a
tomato cost Rupees 10 and has been cut into 5 slices, then
each slice you add in your dish will cost Rupees 2.
 Add the total cost of the ingredients used in the dish to
determine the food cost.
 Now, divide your menu price by the food cost to determine
the percentage of the price that comes from food to begin
determining if you have priced the food correctly.

4. What are the factors affecting the food
costs ?
 When the cost of the raw materials rise, the yield
decreases and the menu price remains constant, the food cost
rises.
 Restaurateurs cannot compromise on the quality of the food
nor they can suddenly decrease the portion size which will
displease their customers.
 Constantly changing oil prices also increase the food costs.
 Not mixing the low and high cost ingredients on the menu.
 Costs tend to increase owing to wastage and theft of
ingredients.

5. Tips on managing the food costs more
efficiently -
Menu Engineering
 Menu Engineering is the process of creating a perfect menu by
studying the profitability and popularity of menu items.
 Use the relative pricing method to lure customers into
spending more by highlighting high profit items.
 A menu which lets you utilize same ingredients in multiple
dishes will help make the utmost use of ingredient and
prevent wastage.

6. Follow a standard recipe
 A standard recipe is the one that follows a set of instructions
to prepare a particular dish and that has been tried and tested
over time.
 Maintaining a standard recipe helps reduce the chance of
wastage and keeps the amount of ingredients used per dish in
check.
 Following a standard recipe is the most effective method of
controlling food costs.

7. Receiving Raw Materials
 Whatever materials that are been purchased for the
restaurant kitchen need to be weighed and measured to make
sure that the right amount of product has been delivered.
 The stock needs to be checked for quality as well. In case of
damaged or spoiled ingredients, the same needs to be
mentioned in the reports. This helps to keep a check on costs.

8. Yield Management
 The yield must be kept in mind while purchasing each
ingredient. How much of the ingredient can actually be used
while preparing a dish needs to be considered.
 Yield management is important for standardization of recipes
and controlling portion sizes.
 You can also try to boost the yield of some ingredients by
reusing them in several dishes and storing well for longer
span of time.

9. Storage and wastage control
 The raw materials must be store properly in order to increase
shelf life and usage for prolonged time.
 It is important to plan when and how much to order by
keeping the shelf life of the product in mind to reduce
wastage.
 Using a POS that comes packed with kitchen management
tools aids in tracking existing stock of supplies. Inventory
management systems help you keep track of existing supplies,
and also tells you when to order fresh stock.

10. Reporting and Accounting
 Reporting and accounting help in forecasting future trends
 Reporting tools help track raw materials purchased, food
prepared and delivered at the restaurant.
 Good restaurant POS software include reporting and
accounting tools that present regular data on all activities
happening at a restaurant.
 All activities, including operations, sales etc need to be
properly reported. These reports must be reviewed regularly
and analyzed to make informed decisions.

11. Analysis
 Before you start planning and putting things into action, you
need to do a market analysis.
 Review similar type of your restaurants and outlets, analyze
trends over the last 3 months and create a plan accordingly.
 Forecasting based on previous trends of food consumption
helps you in minimal stocking and provide only the best and
freshest produce to your customers.
 Analysis of your restaurant must also be done regularly to
identify trends, review own flaws, and to come up with new
actionable ideas.

12. Thank you for reading!
For a detailed article, read- http://bit.ly/1O4zOOY
Know more at – http://blog.posist.com