Every restaurant has two food costs: the one they should have, and the one they actually have. The gap between those two numbers is what you’re losing every single week — and most operators have no idea how wide that gap is.
Let’s fix that.
What Is Ideal Food Cost?
Your ideal food cost is what you would spend on food if everything ran perfectly — no waste, no theft, no over-portioning, no spoilage, no mistakes. It’s calculated based on your menu mix: how many of each item you sold, multiplied by the exact cost to make each item at the correct portion.
Your actual food cost is what you actually spent on food, based on your invoices and inventory counts.
Waste % = Actual Food Cost % − Ideal Food Cost %
Example:
- Ideal food cost: 29.5% of sales
- Actual food cost: 31.0% of sales
- Gap: 1.5% — that’s waste
On a restaurant doing $50,000/week in sales, 1.5% waste = $750/week lost. That’s $39,000 per year walking out the door in the form of spoilage, over-portioning, theft, and mistakes.
That’s real money.
Why the Gap Exists
The difference between ideal and actual food cost comes from several sources:
1. Spoilage
Fresh product that doesn’t get used before it turns. This is often a purchasing and prep planning problem — ordering more than you need, or prepping too far ahead.
2. Over-portioning
A cook who eyeballs a 4oz portion and serves 5oz doesn’t think they’re doing anything wrong. But at scale, that extra ounce across hundreds of plates per week adds up fast. Use scales. Build portion awareness into training.
3. Mistakes and Comps
Incorrect orders that get remade, food sent back, items comped due to complaints. These are real costs. Track them separately so you know if a service or quality issue is driving food cost up.
4. Theft
Uncomfortable to think about, but it happens. Both employee meals/snacks that aren’t tracked and outright theft. Good inventory control is your first line of defense.
5. Unrecorded Voids and Employee Meals
If employees eat and it’s not logged, it hits your food cost as unexplained variance. Set a clear policy and track it.
How to Calculate Ideal Food Cost
For each menu item, you need:
- A recipe cost — the exact cost of every ingredient at the correct portion
- Your menu mix — how many of each item sold in a given period
Multiply the two, add them up, divide by total sales, and that’s your ideal food cost percentage.
Most modern POS systems can generate this report automatically if your recipe costs are entered. If yours can’t, a simple spreadsheet works. Start with your top 10 selling items — they’ll account for the majority of your food spend.
Setting a Waste Target
Some waste is unavoidable. Product spoils. Orders get made wrong. The goal isn’t zero — it’s managed and measured.
A reasonable waste target for most restaurants: 0.5% to 1.0% of sales.
If you’re running more than 1%, dig in. If you don’t know what your waste percentage is, that’s the first problem to solve.
Practical Steps to Close the Gap
Weekly inventory counts. If you’re not counting inventory at least weekly, you have no visibility into what’s happening. Monthly counts are too slow — problems compound before you catch them.
Standardize portions. Recipe cards, scales, and training. Every time. Consistency isn’t just about guest experience — it’s about cost control.
Daily waste logs. Have your team log what gets thrown away each day. Just the act of tracking it reduces waste — people behave differently when they know it’s being measured.
FIFO (First In, First Out). Rotate stock so older product gets used first. Simple, but commonly ignored when kitchens get busy.
Monitor your top 5 high-cost items closely. Protein is usually the biggest food cost driver. Know your beef, chicken, or seafood usage daily. Anomalies are a red flag.
The Takeaway
The gap between your ideal and actual food cost is the most precise measure of operational discipline in your kitchen. Closing that gap — even by half a percentage point — can add thousands of dollars to your bottom line annually without changing your menu or raising prices.
Know your ideal food cost. Track your actual. Close the gap.
Spencer Houlihan is a former CFO for a multi-unit restaurant brand. RestaurantBottomLine.com is dedicated to helping operators protect their financial model.
PROTECTING THE BOTTOM LINE 