Food cost percentage formula for restaurants, with worked examples

For any period, a week or a month:

Food cost % = (Opening stock + Purchases − Closing stock) ÷ Food sales × 100

• Opening stockThe value of ingredients in the kitchen and store on the first day: rice, atta, oil, paneer, vegetables, masalas, dairy.
• PurchasesEverything you bought for the kitchen during the period, from every vendor bill and every cash purchase from the galla.
• Closing stockThe value of what is left on the last day, counted the same way as opening stock.
• Food salesWhat customers paid for food in the period, before GST. Leave out GST, service charge and drinks you track separately.

Opening stock plus purchases minus closing stock is what the kitchen actually used. Dividing it by food sales tells you how many rupees of ingredients each ₹100 of sales needed.

Swaad Kitchen counts its store on 1 March and again on 31 March. The numbers are made up for illustration.

• Opening stock on 1 March: ₹60,000
• Purchases in March: ₹2,40,000
• Closing stock on 31 March: ₹50,000
• Ingredients used: 60,000 + 2,40,000 − 50,000 = ₹2,50,000
• Food sales in March, before GST: ₹8,00,000
• Food cost: 2,50,000 ÷ 8,00,000 × 100 = 31.25%

So about ₹31 of every ₹100 of food sold went on ingredients. The rest has to pay for rent, salaries, gas and power, packaging, delivery app charges and your profit.

Two mistakes make this number wrong. Forgetting cash purchases paid from the galla makes food cost look lower than it is. Using sales including GST makes it look lower too, because GST is not your money.

The same formula works for a single plate. Cost each ingredient at what you paid, for the quantity in one portion. Take a Paneer Butter Masala:

• Paneer, 150 g: ₹60
• Butter, cream and oil: ₹22
• Tomato, onion, cashew and masala: ₹18
• Plate cost: ₹100
• Menu price before GST: ₹320
• Dish food cost: 100 ÷ 320 × 100 = 31.25%

Do this for your top 10 dishes first. Your best sellers decide your monthly number far more than dishes that sell twice a week.

Turn the formula around. Decide the food cost you want for a dish, then:

Menu price = Plate cost ÷ Target food cost %

If the paneer dish costs ₹100 a plate and you want food cost at 30%, the price is 100 ÷ 0.30 = about ₹333, so you might list it at ₹329 or ₹339. There is no official right percentage. Start from your own last three months and set a target you can actually reach.

Food cost alone does not decide a price. A dish with a higher food cost can still earn you more rupees per plate if it sells well and is quick to make. Look at both the percentage and the rupees left over.

On a delivery app order, commission, fees and GST on those fees come out of the same ₹100 that has to cover ingredients. Swiggy and Zomato commissions are reported at about 16–30%, and as high as 22–35% in other reports, with 18% GST on the commission on top. If food cost is 31% and the app keeps 25%, more than half of each rupee is gone before rent and salaries.

That is why many restaurants price app menus higher than the dine-in menu. See what the apps keep per order with the Zomato and Swiggy commission calculator, and check a real week with how to read your Swiggy payout report. Orders from your own online ordering link carry 0% commission and no platform fee.

• Count and value the store on the same day each month, at closing time. Our restaurant closing checklist already has a stock note step.
• Add up every vendor bill and every cash purchase from the galla.
• Take food sales before GST from your billing system's report.
• Work out the percentage and write it next to last month's.
• If it jumped, check wastage, portion sizes, vendor rates and items given free.

In POSBADA restaurant billing the sales side is ready for you: hourly and daily sales reports, and a daily collections report with CSV export. Every void and discount is logged with who did it and why, so free plates show up instead of hiding in food cost.