Restaurant Food Cost and Inventory Control Guide
RestroAI by Taiz · · 8 min read
Most restaurants know what they sold last week. Far fewer know what the food on those plates cost them, or how much of what they bought was thrown away. Food cost and inventory control close that gap. They are not accounting exercises: they decide whether a busy month actually makes money. This guide covers the formulas, the habits and the order of work, in plain terms. All numbers in the examples are made up to show the method, so replace them with your own supplier prices. We build inventory into RestroAI by Taiz, and we say at the end what it does today.
What food cost is, and the formula
Food cost is what you spent on the ingredients for what you sold. It is usually shown as a percentage of sales, because that makes dishes, days and branches comparable. There are two standard calculations.
- Theoretical (recipe) food cost % = cost of ingredients in one portion / selling price x 100. This is what the dish should cost if everything goes to plan.
- Actual food cost % = (opening stock + purchases - closing stock) / sales x 100. This is what you really spent over a period, including waste, theft and over-portioning.
The gap between the two is the number to watch. If the dish should cost 32% but your actual cost is 38%, something in the kitchen is leaking, and you can now go looking for it.
Targets vary by cuisine, price point and channel, so we do not give a universal "right" percentage. Work out your own from your menu, then track whether it moves.
A worked example with illustrative numbers
ILLUSTRATIVE ONLY. These ingredient prices and quantities are invented round numbers to show the method. They are not market prices.
Take a chicken burger sold for PKR 800. Suppose its recipe uses the following ingredients at the prices you pay your supplier.
| Ingredient | Quantity per burger | Cost per unit (illustrative) | Cost per burger |
|---|---|---|---|
| Chicken fillet | 1 piece | PKR 120 | PKR 120 |
| Bun | 1 | PKR 30 | PKR 30 |
| Cheese slice | 1 | PKR 25 | PKR 25 |
| Lettuce, tomato, sauce | Portion | PKR 25 | PKR 25 |
| Packaging (box, bag, napkin) | 1 set | PKR 40 | PKR 40 |
| Total | PKR 240 |
Theoretical food cost = 240 / 800 x 100 = 30%. The gross margin on ingredients is PKR 560 per burger. Now the same dish on a delivery aggregator with an assumed commission of 25% on PKR 800: commission is PKR 200, so what is left after ingredients and commission is PKR 360 before wages, rent and overheads. The same burger sold direct keeps the full PKR 560. That is why channel mix matters, which we cover in own ordering app vs Foodpanda commission.
Notice that packaging sits inside the cost. For delivery items it is a real ingredient, and many menus under-cost it.
Recipes: the foundation
You cannot cost a dish you have not written down. Recipe cards list every ingredient and exact quantity per portion, plus yield: how many portions a batch makes. Include sub-recipes such as sauces, marinades and gravies, because they hide a lot of cost.
- Weigh and measure when you build the recipe, then use scoops, scales and portion tools in service.
- Account for trim and cooking loss. A kilo of whole chicken does not give a kilo of cooked meat.
- Reprice recipes whenever a main supplier price changes. Meat, oil and cheese move the most.
- Use the same recipe in every branch, or mark where they differ.
Stock counts: the habit that finds the leaks
Actual food cost needs an opening and closing stock figure, which means counting. A weekly count of high-value items (meat, seafood, oil, cheese, packaging) is a realistic start. Count fast-moving items often and slow-moving ones monthly.
- Count at the same time each period, ideally before opening.
- Use a fixed order that follows the shelves, so nothing is missed or counted twice.
- Record in the same units you buy and recipe in, such as kilos, litres or pieces.
- Have someone other than the person who orders do the count when you can.
- Compare the result with what the system says you should have, and investigate large gaps.
Waste: record it or it disappears
Waste is the cost that nobody sees because it never appears on a bill. Track it by reason so you can fix the cause, not just count the loss.
| Waste type | Example | Typical fix |
|---|---|---|
| Spoilage | Produce or meat that expired | Order smaller amounts more often; use first-in, first-out |
| Prep waste | Over-trimming, bad cuts | Train, use portion guides, check yields |
| Cooking error | Burnt, dropped or remade dishes | Training and clear ticket timing |
| Customer returns | Wrong or cold order | Fix at the pass; look at delivery packaging |
| Staff meals and comps | Staff food, free replacements | Set limits and record them |
The aim is not zero waste, which is unrealistic. The aim is to know the number, see the biggest cause and cut that first.
Purchase orders and supplier control
Buying is where food cost is won or lost before a dish is cooked. A purchase order is a written request to a supplier for specific items at agreed prices. It lets you match what you ordered against what arrived and what you were billed, which is called a three-way match. Without it, short deliveries and price creep go unnoticed.
- Set a par level for each key item: how much you want on the shelf after delivery.
- Order to the par level, not by feel.
- Check every delivery against the order for quantity, quality and price before signing.
- Return damaged or wrong goods and record the return.
- Compare two or three suppliers on your top ten items twice a year.
- Watch for prices that drift upward between invoices.
Transfers between branches also need recording, because stock that moves without a record looks like a loss at one branch and a gain at another.
What RestroAI does for inventory today
RestroAI includes ingredient stock, recipes, purchase orders with three-way match, supplier returns, stock counts, transfers between branches and waste tracking. These are part of the PKR 15,000 per branch per month price, not an add-on. See the restaurant inventory software page for the full list. The POS and inventory share one platform, so what you sell and what you stock sit in the same system.
Whatever tool you use, the discipline is the same: write recipes, count stock on a schedule, record waste and order against par levels. A spreadsheet can work if you keep it up. Software helps most once you have more than one branch or more than a few dozen ingredients.
Start free at restroai.io. One branch. One price. Every feature.
Frequently asked questions
How do you calculate food cost percentage?
Divide the cost of ingredients by the selling price and multiply by 100. For a whole period, use (opening stock + purchases - closing stock) divided by sales, times 100. Example: a PKR 240 ingredient cost on a PKR 800 dish is 30%. The numbers here are illustrative.
What is a good food cost percentage for a restaurant?
It depends on cuisine, price point and sales channel, so there is no single correct figure. Calculate your own recipe costs, track your actual food cost against them, and watch the gap. Delivery commission and packaging change the picture, so cost each channel separately.
What is the difference between theoretical and actual food cost?
Theoretical food cost is what a dish should cost from its recipe. Actual food cost is what you really spent over a period, including waste, over-portioning and theft. A large gap between them means something in purchasing or the kitchen is leaking.
How often should a restaurant count stock?
Count high-value and fast-moving items such as meat, oil, cheese and packaging weekly, and the rest monthly. Count at the same time each period and in the same units you buy in, so results are comparable.
What is a three-way match in purchasing?
It checks that the purchase order, the delivery received and the supplier invoice all agree on items, quantities and prices. It catches short deliveries and price changes. RestroAI by Taiz supports purchase orders with three-way match.
Does RestroAI track inventory and recipes?
Yes. RestroAI includes ingredient stock, recipes, purchase orders with three-way match, supplier returns, stock counts, transfers and waste tracking, all in the PKR 15,000 per branch per month price with no setup fee.