Food Cost Percentage: How to Calculate It and What to Do About It

Updated 2026-08-06

Food cost percentage is the share of a dish's selling price consumed by its ingredients. It is the most-quoted number in restaurant finance and the most frequently miscalculated, usually because the version people track is a monthly average that hides which specific dishes are causing the problem.

The formula

Here is how to calculate food cost for a single dish: divide the ingredient cost of one portion by its selling price excluding GST, then multiply by 100. A dish costing ₹90 in ingredients and selling for ₹300 has a food cost of 30% — run your own numbers.

For a period rather than a dish, the formula uses actual consumption: opening stock plus purchases minus closing stock, divided by sales for the period. This is the version worth tracking monthly, because the difference between it and your theoretical cost is where waste and shrinkage live.

Always use the price excluding GST. Using the tax-inclusive price understates food cost and makes every dish look healthier than it is.

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What a good figure looks like

These are reference points rather than targets. A 38% food cost is perfectly healthy in a restaurant whose position depends on ingredient quality and whose prices reflect it. What matters more than hitting a benchmark is whether your figure is stable — a number drifting up two points a quarter is a problem regardless of where it started.

Theoretical versus actual, and why the gap is the real metric

Theoretical food cost is what your dishes should have cost given what you sold. Actual food cost is what you really consumed. The gap between them is not a rounding error; it is a measurement of waste, over-portioning, spoilage, staff meals and theft.

A restaurant with a 30% theoretical and 35% actual food cost does not have a pricing problem. It has a five-point operational leak, and repricing the menu would do nothing about it. Separating these two numbers is the single most useful upgrade most kitchens can make to their reporting.

Why the number drifts upward

That last one catches people out. Every dish can be correctly costed and stable while your overall food cost still rises, purely because customers moved toward the items with thinner margins. This is a menu engineering problem rather than a cost control problem, and the fix is different.

• Supplier prices rise incrementally and menu prices do not follow, so margin erodes a little each month without any single visible event
• Portions grow over time, particularly where dishes are plated by eye rather than weighed
• Recipes change informally as staff turn over, and the costed recipe stops matching what leaves the kitchen
• Waste from over-production is treated as normal rather than measured
• The sales mix shifts toward lower-margin dishes, which raises blended food cost even when every individual recipe is unchanged

Fixing it without repricing everything

Repricing is the blunt instrument and usually the last resort, because customers notice. The higher-return moves are generally elsewhere: correcting portions on your highest-volume dishes, where a small change repeats hundreds of times a week; renegotiating your two or three largest ingredient lines rather than the whole purchase list; and steering the sales mix through menu placement toward dishes that already carry good margins.

When you do reprice, do it on items where the customer has no strong reference price. Diners know what a plate of butter chicken should cost and will notice a change. They have far weaker price anchors for composite dishes and specials.

Making it a report rather than a project

Food cost is only useful if you see it often enough to act while a problem is small. Calculating it once a quarter from invoices means finding out about a leak a quarter late.

If recipes are costed in your POS and stock reduces against sales, both theoretical and actual figures come out of the system as a report. Servyn's recipe management tracks recipe-level consumption, which is what makes the theoretical-versus-actual comparison possible without a manual stock exercise every month.

Frequently asked questions

What is a good food cost percentage for a restaurant?

Most full-service restaurants target 28-35%. Quick service typically runs 25-32%, beverage-led cafes 18-25%, and premium ingredient-driven restaurants often accept 35-40%. Stability month to month matters more than hitting a specific benchmark.

How do you calculate food cost percentage?

For one dish, divide the ingredient cost of a portion by its selling price excluding GST and multiply by 100. For a period, use opening stock plus purchases minus closing stock, divided by sales for that period.

What is the difference between theoretical and actual food cost?

Theoretical food cost is what your sales should have consumed based on costed recipes. Actual food cost is what you really used. The gap between them measures waste, over-portioning, spoilage and shrinkage, and it is usually the more actionable number.

Why is my food cost percentage increasing?

The common causes are supplier price rises that menu prices have not followed, portion drift on high-volume dishes, informal recipe changes as staff turn over, unmeasured waste, and a sales mix shifting toward lower-margin items. That last cause raises blended food cost even when every recipe is unchanged.