What is Food Cost Percentage (COGS - Restaurant)?
The Short Answer
Food Cost Percentage (COGS - Restaurant) explained simply
Food Cost Percentage is a key number for any restaurant. It tells you how much of your sales revenue goes directly to buying the ingredients and supplies needed to make your dishes. Think of it as the raw material cost for your menu items. Keeping this percentage in check is vital for a restaurant's profit. If it's too high, it means you're spending too much on ingredients, which eats into your earnings. It helps you price your menu items correctly and manage your inventory efficiently.
Real-World Example
The Burger Joint Example
Let's say a burger joint sells \$10,000 worth of burgers in a month. During that same month, they spent \$3,000 on ground beef, buns, cheese, and other ingredients. \n\nTo calculate the Food Cost Percentage, you divide the cost of food sold by the total food sales:\n\n\$3,000 (Cost of Food Sold) / \$10,000 (Total Food Sales) = 0.30 or 30%\n\nThis means that for every dollar the burger joint makes, 30 cents goes towards the cost of the food ingredients.
Why this matters
Understanding your Food Cost Percentage is crucial for a restaurant owner. It directly impacts your profit margins. A high percentage can signal issues with purchasing, portion control, or pricing. By tracking this metric, you can make smart decisions about your menu, suppliers, and inventory to keep your costs down and your profits up. It helps you see if your business is running efficiently.
Always keep a close eye on your Food Cost Percentage. Even a small change can have a big impact on your bottom line. Regularly review your supplier prices and portion sizes to make sure you're getting the best value and not wasting ingredients.
Always keep a close eye on your Food Cost Percentage. Even a small change can have a big impact on your bottom line. Regularly review your supplier prices and portion sizes to make sure you're getting the best value and not wasting ingredients.
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