Food cost percentage tells you what portion of your food sales goes toward ingredients. The basic formula is Food Cost divided by Food Sales, multiplied by 100.

For a quick calculation, take your food purchases for the month and divide by food sales for the same period. If you spent $8,000 on food and brought in $28,000 in food sales, your food cost percentage is 28.6%.

That quick method has a problem though. It only counts what you bought, not what you actually used. A more accurate formula uses inventory counts: Beginning Inventory plus Purchases minus Ending Inventory, divided by Food Sales, times 100. If you started the month with $3,000 in inventory, purchased $8,000, and ended with $2,500, your actual food used was $8,500. That changes your food cost percentage to 30.4%.

Most full-service restaurants aim for 28% to 35% food cost. Fast casual runs lower, around 25% to 30%. Fine dining often runs higher because of premium ingredients. Where you fall depends on your concept, but knowing your actual number is the starting point for any adjustments.

Several things push food cost percentage up. Waste from spoilage, inconsistent portion sizes, menu items priced too low, and employee theft are the usual culprits. If your percentage spikes suddenly, one of these is almost always the cause. Tracking it monthly at minimum helps you catch problems before they drain profits for months.

The calculation only works if your numbers are accurate. Inventory accounting requires consistent tracking of purchases and regular physical counts. Many restaurant owners estimate inventory or miss purchases paid in cash, which makes the percentage unreliable.

Once you know your real food cost percentage, you can set menu prices intentionally. If you want a 30% food cost on a dish that costs $4.50 to make, you need to price it at $15. Working with a bookkeeper in Northwest Arkansas who understands restaurant accounting helps you track this consistently so you make decisions based on real numbers instead of guesses.