- 7 Common Restaurant Marketing Myths Busted
- Why Salads Continue to Boost Profits for Restaurants
- 5 Ways Your Restaurant Will Benefit from Yelp
- Pour Smart: Why Spills and Overpouring are Costing Your Bar Big Bucks
- Guest Data Empowers Bars and Restaurants to Make Smarter Business Decisions
- Why Craft Beer Drives Sales at Your Bar
- Does Your Restaurant Need a Surveillance System?
- How to Create Unforgettable Customer Experiences in Your Bar
- Restaurant Management: How to Use Contests to Boost Morale (and Sales)
- How to Save Money on Social Media Services for Your Restaurant
How to Calculate Your Food and Beverage Cost
Whether you run a steak and seafood restaurant, a family restaurant, a pub or a martini bar, you need to know your food and beverage cost.
These simple calculations can be done on the back of a napkin to calculate your food cost/margin or beverage cost/margin.
The basic calculation itself is simple:
Opening Inventory Value + Cost of Purchases – Closing Inventory Value = Usage Amount
Usage Amount / Sales Revenue = Cost of Goods Sold (%)
This formula can be used to calculate your food or beverage cost anytime you want to: monthly, weekly or daily.
Example: Weekly Food Cost Formula
First, you need to collect the information that is required to do your food cost calculation.
You will need to have done a physical inventory of your stock, and you will need to add up your purchases for the week. You will also need to have your food sales for the week available.
Your opening inventory is the dollar value of what you began your week with. If you do a regular food cost calculation, your opening values will be the last closing value you had.
Your purchases amount is the dollar value of whatever you purchased during the week.
Your closing inventory dollars is the value of what is still in stock at the end of your week.
When you add your opening inventory and your purchases, you calculate the total product that you purchased for the week. When you subtract your closing inventory, you end up with your usage for the week.
Because your closing inventory is still in stock, you need to subtract it from the equation, because even though you purchased it in that cycle, you haven’t used it yet.
Then you take your usage and divide by your food sales for the week. The percentage you arrive at is your food cost.
Here is an example of how this calculation works:
Opening Inventory: $10,300
Closing Inventory: $8,200
Food Sales: $22,000
Using the formula, your food cost would be calculated in the following way:
$10,300 + $5,500 – $8,200 = $7,600
$7,600 / $22,000 = 34.55 %
In this example, you began with $10,300 of food product in stock. You purchased $5,500 through the course of the week, and at the end of the week you did a physical inventory and determined that you still have $8,200 of product in stock.
Therefore, your usage for the week was $7,600.
Thousands of Bar and Restaurants Run on Buzztime. Here’s Why Yours Should, Too…
Buzztime is the preeminent partner to best-of-breed hospitality chains and enterprising, on-premise, emergent bar & restaurant brands like yours. Whether it be our measured marketing services, proven promotions, proprietary digital games or signature live events, Buzztime can deliver revenue and returns through a transformative and translatable experience in your venue and through targeted messaging.
We are trusted by over 3,500 premier bars & restaurant chains, with 3 million active registrants and 50 million games played per year – preferred now, and for the last 27 years. Contact us to get started today!