The theory of relativity, part two

In part one of this subject, we discussed the age-old question, "Is my food cost too high?" The first step in determining if the answer was "yes" or "no" was to compare your restaurant's performance to industry averages calculated by the National Restaurant Association.

While you end up with some interesting data, it doesn't exactly answer our question. First, survey data, even statistically significant data, requires only a small sampling of the thousands of restaurants in the U.S. Second, national averages are only averages. That means there are many restaurants with higher food costs, and many with lower food costs, and even a few on the extreme ends of the spectrum.

Also, whether or not your food cost is too high is very relative to your style of operation and the type of food you serve. Therefore, we're better off determining if your food cost is in line. To find out, you need to calculate a Theoretical Food Cost and compare it to your Actual Food Cost.

To do this, you need:

  • A list of your menu items
  • The retail/menu price of each item
  • The cost of each item, including any "give-away" (garnish, bread, condiments, etc.)
  • The total number sold of each item

First, calculate your Theoretical Food Cost %

Second, calculate your Actual Food Cost %

Finally, compare the two. If they vary by more than two percentage points, then you may have a problem with waste, incorrectly recorded comps, unrecorded employee meals, or theft. Tighter controls can bring your actual food cost closer to what it should be.

If they're within two percentage points of each other, then you can safely say that your food cost is in line.

Download a Theoretical Cost Analysis worksheet that will help you keep your food cost in check on a weekly basis.

Members help make our journalism possible. Become a Restaurant Business member today and unlock exclusive benefits, including unlimited access to all of our content. Sign up here.

Multimedia

Exclusive Content

Food

Restaurants can learn some foodservice tricks from supermarkets

State of the Plate: Nancy Kruse, RB’s menu trends columnist, says grocers are stepping up their game, and restaurants need to keep up.

Financing

So you are opening a restaurant in a Walmart? Good luck with that

The Bottom Line: The retail giant is adding regional restaurant chains to its stores, giving them some key exposure. But there are some real drawbacks to pay attention to.

Financing

The FTC signals a tougher stance on franchising, for now

The Bottom Line: The agency’s comments last week represented some of its toughest regulatory moves on franchising in years. But the election might have a say in it.

Trending

More from our partners