Rising food costs can crush a restaurant's profitability. The crazy part about this is many restaurants are getting worked up and in a panic looking at the incorrect number. When it comes to the food cost formula, there's only one way to do it correctly, and I mean one way. Stay with me and learn the right way to calculate your restaurants food costs.

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Welcome to my YouTube Channel. I am David Scott Peters, a restaurant coach and speaker who teaches restaurant operators how to cut costs and increase profits with my trademark Restaurant Prosperity Formula. Known as THE expert in the restaurant industry, I apply my no-BS style to teach and motivate restaurant owners to take control of their businesses and finally realize their full potential. Thousands of restaurants have used my formula to transform their businesses. To learn more about me and my coaching program, visit [ Ссылка ].

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First I want to tell you that no matter when you're watching this video, your food costs are rising. For example, is there a week where your broadline distributor doesn't walk into your restaurant talking about how some commodity product will be astronomically high next quarter due to some catastrophic event like citrus crops being virtually wiped out in Florida due to a hurricane? Add to that inflation and recession, and it becomes more and more important to know where your food costs are.

Beginning inventory plus purchases gives you what your total available is, how much food you could sell. If you had $5,000 on the shelf of product, food product, when you started the week, and you purchased $10,000 in product and didn't open the doors at all, you would have $15,000 in product on the shelf. That's the total available.

Next take an ending inventory at the end of the period, preferably a week, could be a month. Whenever you take that total, what's valued on the shelf at that moment, and subtract it from that total available, this gives you use.

Take your total available minus your ending inventory. This is use. What is use? Hopefully you sold it. It could have spoiled or wasted. It could have been stolen or heck, you might have taken it out the back door because you own the place and didn't put it on a waste sheet. It doesn’t really matter how the product leaves because the equation is math. It's blind to reason. That's why we need other systems in our business to track and control how we use our product.

But that use is the cost of goods sold, the amount of product you used for the money you brought in. Now we take that use divided by gross sales – food sales alone, since we're talking about food cost. And that gives you your food cost percentage. If you come up with say, a 30% number, that means for every dollar that comes in in food sales, you used $0.30 in product.

Now, that is the only way, and it is the right way, to give you the right number.

So when it comes to food costs, it's beginning inventory plus purchases, minus ending gives you use, divided by sales gives you your food cost percentage. That's it.

With the right number, you can make proactive changes back on your budget. To get back on budget, if your food cost is high, you can look at recipe costing cards, re-engineer your menu, look at waste sheets to stop mistakes, your key item tracker to prevent theft, change your menu. You can do so many different things from portion controls to tracking properly.

Now it really comes down to budgeting, though. That's the key word. Where should your food cost be? It is based on your budget. To learn more about budgeting, make sure you search my YouTube channel here for great lessons on why you need to start budgeting. Because it's critical. Knowing your food cost is one thing. Knowing where it should be for you to make money is a totally different story.
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