Written by The Pragmatic CFO. 15+ years running restaurant P&Ls.
This article is part of The Prime Cost Series.
Inventory on your shelf is cash you’ve already spent. Turnover tells you how fast it comes back. Too slow and you’re funding waste and theft. Too fast and you run out mid-shift. Here’s how to measure it and what normal looks like.
The two formulas
- Average inventory: (opening count plus closing count) divided by 2.
- Turnover: cost of goods sold for the period divided by average inventory.
- Days on hand: average inventory divided by cost of goods sold per day.
A worked example
Food cost of goods for the month is $30,000. You started the month with $7,000 on the shelf and ended with $5,000.
| Step | Result |
|---|---|
| Average inventory | $6,000 |
| Turnover, $30,000 divided by $6,000 | 5 turns a month |
| Cost per day, $30,000 over 30 days | $1,000 |
| Days on hand, $6,000 divided by $1,000 | 6 days |
What normal looks like
| Category | Turns a month | Days on hand | Source |
|---|---|---|---|
| Food overall | 4 to 6 | 5 to 7 | MarketMan, Sculpture Hospitality |
| Liquor and wine | about 1 | about 30 | MarketMan, Sculpture Hospitality |
| Bottled and canned beer | 2 to 3 | 10 to 15 | MarketMan, Sculpture Hospitality |
| Draft beer | 1 to 2 | 15 to 30 | MarketMan, Sculpture Hospitality |
BevSpot suggests two to three weeks of stock per bar item. I couldn’t find a sourced benchmark for produce, proteins or dry goods on their own. Common sense applies: produce should turn fastest, dry goods slowest.
What it means in cash
Say your liquor cost is $6,000 a month and you’re carrying $12,000 of it. That’s half a turn a month, 60 days on hand. At one turn you’d carry $6,000. Getting there frees $6,000 of cash once and cuts what can walk out the back door.
On the food side, the same restaurant at 10 days on hand instead of 6 holds $4,000 more than it needs, and more of it spoils.
How to improve turnover
- Count weekly, the same day and time, by the same person.
- Set par levels from your sales forecast, not from habit.
- Cut slow items. Anything that hasn’t moved in 60 days is a candidate.
- Order more often in smaller amounts where your vendors allow it.
A worked example: setting a par from the forecast
Next week’s forecast is 700 chicken plates at 8 ounces each. That’s 350 pounds, about 50 pounds a day. Deliveries come twice a week, so each one covers about 175 pounds. Add 20% for a busy night and your par is 210 pounds.
| Line | Ordering by habit | Par from the forecast |
|---|---|---|
| On hand after delivery | 400 pounds | 210 pounds |
| Cost at $4 a pound | $1,600 | $840 |
| Days on hand | 8 | about 4 |
That’s $760 of cash back on one item, and less chicken sitting long enough to go bad. Do the same for your top 20 items by dollars and most of the slow money shows up.
Related: restaurant inventory management and inventory software compared.
Free: The Restaurant Financial Health Checklist. 30 monthly checks across sales mix, prime cost, 4-wall EBITDA, cash and operations, with the target ranges I use. Written by a former chain CFO. Instant PDF.
Unsubscribe anytime.
More on this: how to lower food cost, bar pour cost by category.
Count, cost and log waste in one place.
The Toolkit’s Food Cost Calculator pairs weekly ideal vs actual cost with a waste log, so slow-moving and spoiled stock shows up in dollars.
Get the Toolkit, $67FAQ
What is a good inventory turnover for a restaurant?
For food, 4 to 6 turns a month, or 5 to 7 days on hand, according to MarketMan and Sculpture Hospitality. Liquor and wine turn about once a month.
How do you calculate inventory turnover?
Cost of goods sold divided by average inventory, where average inventory is opening plus closing count divided by 2.
How do you calculate days on hand?
Average inventory divided by cost of goods sold per day.
Is high turnover always good?
No. Turning too fast means frequent stockouts and rush orders. Aim for the range, not the maximum.