Food cost percentage: formula, examples, and how to lower it
The single number that decides whether your menu makes money — and how to control it.
6 min read · Updated June 16, 2026
Food cost percentage = (cost of ingredients used ÷ food sales) × 100. For example, if you spent Rs. 30,000 on ingredients to produce Rs. 100,000 in food sales, your food cost is 30%. Most healthy restaurants run a food cost of 28–35%; above ~35% margins get tight.
The formula
Food cost percentage = (cost of goods sold ÷ food sales) × 100. Cost of goods sold (COGS) is the cost of the ingredients you actually used in a period, not what you purchased — so you account for opening and closing stock: COGS = opening inventory + purchases − closing inventory.
Worked example: open the month with Rs. 80,000 of stock, buy Rs. 250,000, end with Rs. 90,000. COGS = 80,000 + 250,000 − 90,000 = Rs. 240,000. If food sales were Rs. 750,000, food cost % = 240,000 ÷ 750,000 × 100 = 32%.
What's a healthy food cost percentage?
Most full-service restaurants target 28–35%. Quick-service and high-volume concepts can run lower; fine dining with premium ingredients often runs higher. The right number depends on your format — what matters is that you track it and that it's stable month to month.
Food cost is only half the picture. A 30% food cost is worthless if labour and rent eat the rest. That's why you pair it with a real P&L rather than watching food cost in isolation.
How to lower it
Cost every recipe so you know the margin on each dish, then reprice or re-engineer the low-margin ones (see menu engineering). Tighten purchasing and portioning, track waste, and watch supplier price changes — a 10% jump in cooking oil quietly moves your food cost if nobody's looking.
Software helps by recomputing each dish's cost automatically whenever an ingredient price changes, so your food cost percentage isn't a monthly surprise — it's a number you can see per dish, per shift, in real time.
FAQ
- What is a good food cost percentage?
- Most full-service restaurants aim for 28–35%. QSR can be lower; fine dining higher. Consistency matters more than a single 'ideal' number.
- Is food cost the same as COGS?
- Food cost percentage is COGS expressed as a percentage of food sales. COGS is the rupee cost of ingredients used, adjusted for opening and closing inventory.