Running a profitable restaurant requires more than just serving up delicious dishes. Restaurant management calls for a keen sense of business, the right software and technology, and ample planning for how you can keep your costs down.
One of the most important questions restaurant owners grapple with is how to reduce food costs. Ensuring you’re keeping food costs down can often be the difference between the success and failure of your restaurant.
Understanding your food cost percentage is the first—and most important—step toward keeping food costs down, achieving profitability and staying in business.
What Is Food Cost Percentage?
Food cost percentage is the ratio between the total cost of your ingredients and the amount of revenue you get from selling each dish. Here’s a simplified version of this equation:
We’ve created an in-depth food cost calculator to help you calculate your true food cost percentage. With it, you’ll be able to understand your food cost percentage and price your menu items correctly, in turn ensuring your restaurant is set for profitability.
What this food cost calculator does:
- Calculates food cost percentage
- Provides food cost per dish
- Analyzes profitability of menu item based on cost margin
- Adjusts menu selling price to see profit and cost margin
Strategies for Reducing Food Costs
After crunching the numbers with our calculator, did you realize your food costs are higher than you thought? Here are some strategies for increasing your profitability:
Monitor prices for ingredients: When food prices fluctuate, your margins will be impacted as well. That’s why staying on top of your food cost percentage regularly is imperative. If the price for an ingredient gets too expensive, you can either experiment with a different, cheaper ingredient, reduce the quantity used or increase the price of the menu item.
Remove low performers: Find out what your best sellers and low performers are with your restaurant POS and consider removing items that aren’t selling as well.
Adjust portion sizes: Measuring and controlling your portion sizes is vital to keeping your restaurant’s profits and margins in check. You can ensure your portions are consistent by using color-coded measuring cups, spoons and scoops, slicing and portioning items ahead of time, and training your staff accordingly.
Compare your pricing with competitors: Coming up with the best price isn’t all about math. You need to know what’s considered a “fair price” as well as what your competitors are charging for similar items. The right price earns the trust of your customers, meaning they’re more likely to return and keep your restaurant profitable.
Implement restaurant POS software: Want the ability to track your best-selling and low-performing items? Or monitor how changing the price of an item affects sales? That’s what the right restaurant POS system can do for you. Our team of expert restaurant software advisors can help—give us a call at 844-685-8455 for a free 15-minute consultation.