Ask ten restaurant owners what their food cost is and most will give a rough guess. The ones who know the real number are usually the ones making steady profit. Food cost percentage is simple to calculate once you have the habit, and it is the single most useful number for a kitchen.
The basic formula
Food cost percentage = cost of ingredients used ÷ food sales × 100.
You can use it in two ways. Per dish, it tells you whether a menu price makes sense. Per month, it tells you whether the kitchen as a whole is under control. You need both.
Per dish: costing a full chicken karahi
Start with a written recipe card for the dish. Weigh every ingredient once, the way your head cook actually makes it, and price each one at what you paid last. Here is an example for one full chicken karahi made with 1 kg of chicken:
| Ingredient | Quantity | Purchase price | Cost |
|---|---|---|---|
| Chicken (with bone) | 1 kg | Rs 750 per kg | Rs 750 |
| Tomatoes | 500 g | Rs 160 per kg | Rs 80 |
| Cooking oil / ghee | 200 ml | Rs 560 per litre | Rs 112 |
| Ginger and garlic | 100 g | Rs 600 per kg | Rs 60 |
| Yogurt | 100 g | Rs 240 per kg | Rs 24 |
| Green chillies | 50 g | Rs 200 per kg | Rs 10 |
| Spices and salt | mixed | estimated | Rs 40 |
| Fresh coriander and garnish | small bunch | estimated | Rs 14 |
| Total food cost | Rs 1,090 |
If the menu price is Rs 3,200, the food cost percentage is 1,090 ÷ 3,200 × 100 = 34.1%. In other words, about Rs 34 of every Rs 100 the customer pays for this karahi goes into ingredients. The rest has to cover salaries, rent, gas, electricity, packaging and your profit.
Setting a price from a target
You can turn the formula around. If you want this karahi at 32% food cost, the price should be 1,090 ÷ 0.32 = Rs 3,406, so roughly Rs 3,400. If the market will not accept that, look at the recipe instead: a smaller oil quantity or a cheaper but acceptable ghee may bring the cost down without the customer noticing.
Comparing dishes on one menu
Doing this for every item shows you quickly where the money is made. Here is a sample from a mid-sized karahi restaurant:
| Item | Food cost | Menu price | Food cost % |
|---|---|---|---|
| Chicken karahi (full) | Rs 1,090 | Rs 3,200 | 34.1% |
| Mutton karahi (full) | Rs 2,450 | Rs 5,800 | 42.2% |
| Chicken biryani (plate) | Rs 260 | Rs 650 | 40.0% |
| Daal mash (plate) | Rs 140 | Rs 550 | 25.5% |
| Naan | Rs 12 | Rs 40 | 30.0% |
| Doodh patti chai | Rs 45 | Rs 150 | 30.0% |
Mutton karahi and biryani carry high percentages, while daal and naan are cheaper to make relative to their price. A high percentage is not automatically bad, because a mutton karahi still earns a large amount of rupees per plate. That trade-off is the subject of menu engineering.
Per month: the actual food cost
Dish costing tells you what food cost should be. The monthly calculation tells you what it really was. For this you need a stock count at the start and end of the month. The formula is the same one used for cost of goods sold:
- Opening stock value (from last month's closing count)
- Plus purchases during the month
- Minus closing stock value (from this month's count)
- Equals the cost of food used
Example: opening stock Rs 380,000, purchases Rs 1,240,000, closing stock Rs 420,000. Food used = 380,000 + 1,240,000 − 420,000 = Rs 1,200,000. If food sales for the month were Rs 3,500,000, actual food cost percentage = 1,200,000 ÷ 3,500,000 × 100 = 34.3%.
The gap between theory and reality
Now compare the two numbers. If your recipe costs say the month's sales should have used ingredients worth 31.5% of sales, and the actual figure is 34.3%, the gap is 2.8 percentage points. On Rs 3,500,000 of sales, that is 0.028 × 3,500,000 = Rs 98,000 in one month that went somewhere other than a customer's plate.
That gap usually comes from a handful of causes:
- Over-portioning: the cook adds an extra spoon of ghee or a few extra pieces of chicken.
- Waste: spoiled tomatoes, burnt naan, leftover rice thrown out at night.
- Unbilled food: staff meals, food for friends and family, items served but not rung up.
- Theft: stock leaving through the back door.
- Wrong prices in your costing: chicken went from Rs 650 to Rs 750 and nobody updated the recipe cards.
How to bring food cost down
- Update ingredient prices every time you buy. Chicken, tomato and onion prices move every week in Pakistan, so recipe costs from three months ago are useless.
- Standardise portions with scoops, ladles and scales. A Rs 300 kitchen scale pays for itself in days.
- Count your key items weekly: chicken, mutton, oil, ghee, rice and flour. Our guide on restaurant inventory counts shows a simple method.
- Keep a waste log next to the bin, and read it every week.
- Record staff meals as a separate entry, so they do not hide inside the variance.
- Review prices of high-cost items each quarter instead of all at once.
Common costing mistakes
Even owners who cost their dishes often get the number wrong in the same few ways. Check your own recipe cards against this list:
- Using the price per kg of whole chicken while the recipe uses boneless. If 1 kg of chicken with bone gives about 650 g of boneless meat, boneless really costs 750 ÷ 0.65 = about Rs 1,154 per kg.
- Forgetting the sides that go out free with a dish, such as salad, raita or chutney with every karahi.
- Leaving out cooking loss. Mutton loses weight as it cooks, so buy-weight and serve-weight are different.
- Costing at an old price. Cooking oil and ghee prices change with every budget and every rupee move against the dollar.
- Mixing drinks into food cost. Cold drinks and bottled water have very different margins, so track beverage cost separately.
Fixing just the boneless mistake can change a dish's food cost by several percentage points. A chicken tikka boti priced on the whole-chicken rate looks far more profitable on paper than it really is.
Doing this without a spreadsheet every night
The maths is simple, but doing it by hand every day is tiring, and most owners give up after a few weeks. Software that links recipes to stock does the per-sale deduction for you. In ArfaPOS, for example, each menu item can carry its recipe, so selling a karahi deducts the chicken, oil and tomatoes from kitchen stock and the food cost reports build up on their own. See recipe costing software for how that works in practice.
Remember that food cost percentage uses sales before any sales tax. If your menu prices include tax, take the tax out first or your percentage will look lower than it really is.