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What is food cost? Method of calculating food cost in restaurants and hotels

If you want to manage a restaurant, hotel effectively, bringing high profit, setting a menu with reasonable prices is extremely important. Therefore, ask managers to know the ways of Food cost in many different ways. So what is food cost? How the formula for calculating Food cost and Food cost calculation methods in hotel restaurants.

What is food cost?

Food cost is the term used to refer to the prices of food and drinks in the hotel restaurant. Food cost is not the same in different restaurants. Because Food cost is determined based on many factors: food prices, hotel class, “hot”, …

In the same restaurant, food cost can change over time (by season, by year). Providing appropriate food costs, it is extremely important because they affect the profits that the restaurant earns.

Food cost là gì?
What is food cost?

Food cost  formula

Food cost = Original cost of raw material: Percentage of food costs

In particular, the percentage of food costs is set depending on the different hotels. However, that ratio always ranges from 25-55%.

In the opinion of many experts in the field of restaurants, hotels, the gold percentage to calculate the current food cost for restaurants and hotels is 35%. This is also the rate chosen by many restaurants and hotels.

In order to maximize profits, many large restaurants and hotels have invested in farms and slaughterhouses to provide the majority of food every day. This will reduce the percentage of food costs and help the restaurant earn more profits.

An example of a restaurant’s price calculation formula

The grilled chicken dish in the hotel needs initial food costs including;

  • 1 chicken: 120,000
  • Spices, vegetables included: 30,000

=> The total cost for a piece of grilled chicken is 120,000 + 30,000 = 150,000

So, if you take the cost percentage of 35%, the price of the grilled chicken in the hotel will be calculated as:

Food cost = 150,000 / 35% = 429,000

Normally, this price will be increased or decreased accordingly when posted on the menu for many reasons:

  • To get the round number
  • To create beautiful numbers
  • Let the guests not feel expensive
Food cost được tính dựa trên nhiều yếu tố, trong đó, có giá thực phẩm
Food cost is calculated based on many factors, including food prices

Methods for valuing food in hotels

The price of the food is the right of each restaurant, however, the price of food is also one of the reasons for customers to choose a restaurant, which directly affects the revenue and profit of the restaurant. . Currently, restaurants often apply the following methods to value food:

Food pricing according to food standards

This method of valuation is also the formula for calculating the food cost shared above. Depending on the policy of each restaurant, the percentage of food costs may range from 25 to 35%.

Pricing food according to competitors

With this method, restaurant owners will price food equivalent or slide lighter than their competitors to attract customers if two restaurants share the same service quality. However, when valuing lower than competitors will put pressure on the chef because they have to calculate how to reduce food costs of the dish.

Valuation of food by supply – demand

There is a clear rule that when supply is large – demand is low, prices will fall,supply is less – demand more, prices will increase. For example, if there is only one restaurant selling some interesting food, it is easy to see the price phenomenon being pushed up. Or there are many restaurants in the area that serve a dish, of course the price will decrease. Therefore, restaurants need to carefully study the market and customer base before deciding on a price to set a competitive and reasonable price.

Pricing according to profitability

With this valuation method, restaurant owners will base on the list of dishes on the menu, consider which dishes are capable of bringing the highest total profits for the restaurant so that they can find ways to promote sales.

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