FOOD-COST GUIDE
Food-cost percentage: calculate the recipe before judging the menu
Food-cost percentage is useful only when its numerator and denominator describe the same thing. A detailed ingredient cost divided by an inconsistent selling-price figure creates a neat percentage that cannot guide pricing.
Calculate edible recipe cost
List every ingredient in the quantity actually used for one sellable portion. Convert purchase prices into the same unit, then adjust for usable yield. If 1 kg is purchased for ₹200 but only 800 g remains after cleaning, the usable cost is ₹0.25 per gram, not ₹0.20. Include oil absorption, garnish, sauces and other small components when they are material.
Define the selling-price basis
State whether your denominator excludes GST, customer delivery charges and platform-funded discounts. For a menu decision, use the revenue the restaurant economically owns under your documented policy. Avoid dividing by the menu MRP in one report and net realised revenue in another.
Worked example
A bowl uses ₹64 of main ingredients, ₹11 of sauce and garnish, and ₹5 of expected preparation loss. Recipe food cost is ₹80. If defined restaurant revenue is ₹320, food-cost percentage is 25%. If a restaurant-funded ₹40 discount reduces revenue to ₹280 while the recipe remains unchanged, the effective food-cost percentage becomes 28.6%.
This illustrates why a discount can damage margin even when food cost per plate is stable. Platform commission, packaging and advertising still need to be added before contribution is known.
| Component | Cost |
|---|---|
| Main ingredients | ₹64 |
| Sauce and garnish | ₹11 |
| Preparation loss allowance | ₹5 |
| Total food cost | ₹80 |
| Revenue before funded discount | ₹320 |
| Food-cost percentage | 25.0% |
Theoretical versus actual food cost
Theoretical food cost comes from recipes multiplied by item quantities sold. Actual consumption comes from opening stock plus purchases minus closing stock, adjusted for transfers and staff meals. The difference can indicate waste, portion variation, theft, recipe errors or stock-count problems.
Compare both across a meaningful period. A one-day comparison can be distorted by purchases and stock timing. Investigate high-value ingredients first, then items with frequent modifier or add-on mistakes.
Use the result without chasing a universal target
There is no single correct food-cost percentage for every cuisine or format. A beverage, biryani and premium protein dish naturally behave differently. Evaluate contribution rupees, preparation time, demand, wastage risk and platform charges together. A higher food-cost item can be attractive if its price and volume produce strong contribution.
Practical control routine
- Maintain recipe versions with dates and portion units.
- Update purchase prices at a documented frequency.
- Record yield assumptions for trimmed ingredients.
- Map exported menu names and variants to recipe codes.
- Compare theoretical consumption with inventory movement.
- Recalculate pricing scenarios before changing a live menu.
Frequently asked questions
Does packaging belong in food cost?
Keep it separate for clearer diagnosis, but include it in total variable cost and contribution.
Should I include kitchen labour?
Direct per-order labour can be modelled as a variable cost. Regular monthly salaries are usually considered after contribution when evaluating operating profit.
How often should recipes be updated?
Whenever ingredients, portion sizes or preparation methods change. Update unit prices frequently enough to reflect material supplier movements.
Educational information only; use your own recipes, invoices and accounting policy.