What is food costing?

Food costing is the total cost of all ingredients required to make a dish. It does not include things like labor costs and overhead, though some will include the labor required to prep the food but not to serve the food. It is important to note that food costing pertains to the entirety of the ingredients used. For example, you may add '1 lb of diced onions' to a recipe; but if first had to take whole raw onions, peel them, and trim the core before dicing, you likely used more than 1lb. Proper food costing accounts for the total amount of product used. This difference in the amount of product is called the ingredient yield. More on that later.
What is food cost control?

Food cost control is the ongoing process of first and foremost, understanding your actual true food costs, and further reducing food waste and optimizing the profitability of menu items. Understanding your food cost requires accurate recipes, properly calculated ingredient yields and unit conversions, and having real time updated purchase prices tied to your recipes. Food cost control allows you to improve the bottom line of your food business / restaurant.
How do you calculate food cost?

There are 2 levels to thinking about food cost. First is accurate real - time cost of the menu item. Next is the expressing that as a percentage of that menu item's sell price, known as the food cost percentage.
Calculate the cost of a menu item by the sum of the total cost of the raw amount of all ingredients used to make a recipe or menu item.
To calculate the food cost percentage, you will divide the food cost of the menu item by the sell price of that item. For example, if a salad has a direct food cost of $3 and a sell price of $10, then the food cost percentage is 30% ($3 divided by $10 = 0.3)
How do you calculate profit margin?

Profit Margin is calculated as the sell price of a menu item minus the food cost. In the case of the $3 salad from above at a $10 sell price, the profit margin would be $7 ($10 minus $3 = $7)
The profit margin % is then calculated by dividing the profit margin by the sell price. In this case it would be 70% ($7 divided by $10 = 0.7)
How do you calculate a total menu cost?

To calculate the total cost of a menu you'll first need to calculate the theoretical food cost of the menu items. This is calculated by multiplying the quantity of the menu item sold divided by the direct food cost of that menu item. For example, if you sell 10 salads that cost you $3 each, your theoretical food cost is $30 ($3 multiplied by 10 = $30)
You can then do this for each menu item sold and calculate the total theoretical menu cost. This is the total theoretical menu cost. For example, let's say all menu items sold total $100 in cost.
Finally, you'll want to express this as a percentage. You will take the total theoretical menu cost and divide it by the total sales of your menu to achieve your theoretical food cost %. In this example, let's say you had sales today of $400. This means your total theoretical food cost is 25%. ($100 divided by $400 = 0.25)
How do you calculate the 'actual' food cost percentage of your business?

To calculate the actual food cost percentage of your business you will need to track inventory either once a week, month, quarter or year. The calculation is then the total amount you spent + beginning inventory dollar amount minus ending inventory dollar amount divided by total sales.
How to do food costing for a restaurant or food business?

Food costing starts with a thorough and accurate accounting of all ingredients, no matter how small, used in a dish. Properly tracking food cost in your restaurant or food business means consistently tracking the theoretical food cost percentage of your total menu versus the actual food cost percentage you are achieving. The difference between the two is what you are wasting and your opportunity to save money and improve your bottom line.
What are the benefits of food costing?

Food costing has many benefits. The most important is that it allows you to understand, and thus control, the effect food spending has on your budget. It also helps you control overall costs thus giving you control of your bottom line and helping you build a profitable business.
What is the purpose of food costing?

Food costing allows you to determine the food cost of every dish. This helps with budgeting and menu pricing, amongst other things. Food costing has a direct impact on restaurant profitability. Combined with other factors, like overheads and labor, food costing helps you control restaurant costs and maintain a profitable bottom line.
What is food costing software?

Food costing software should automate the critical process of food costing for restaurants. At it's best, it should help you determine accurate yield loss, unit of measure conversion, and prepped recipe costs nested within menu items easily and quickly. It will help you build a comprehensive database of recipes and current ingredient costs. It should also allow you to improve your recipes and menu items for the optimal profit margins / profitability of your restaurants or food business.
How can you reduce food cost for a restaurant?

There number one way to reduce food cost in your restaurant or food business is to reduce the theoretical menu costs. This is done with a tool that can help you engineer optimal profit margins for each dish. The best way to maintain food costs is to execute properly, have clearly defined recipes, and a single source of truth for all of your content.
What is a recipe management system?

While food costing software automates the critical process of food costing for restaurants, a recipe management system should enable you to manage every process associated your recipes. This means organizing recipes, scaling batch sizes, colllaborarting with team members, R&D, food cost analysis, nutrition labeling and allergen analysis, training and learning management, and sharing recipes with team members and colleagues.
What is a recipe database?

A recipe database is the entirety of all of your recipes stored digitally in one place. You should be able to search, filter, sort, and manage all of your content quickly and easily.