Definition
Food cost (cost-of-goods-sold ratio) is the share of raw material costs in net revenue, expressed as a percentage. Formula: Food cost (%) = Goods cost ÷ Net revenue × 100.
Background & relevance for restaurant operators
A food cost of 25–35% is considered healthy for full-service restaurants. Quick-service restaurants and snack bars often sit at 20–28%; fine-dining venues may accept up to 38% when beverage margins and service revenue provide the offset. Calculation: Opening stock + Purchases in the period − Closing stock = actual goods cost; divide by net revenue and multiply by 100 to obtain the food cost percentage. Common causes of an elevated food cost include poor portion control, theft, spoilage from inadequate storage, and lack of standardised recipes. Levers for reduction: standardised recipes with fixed portion weights, FIFO stock management, weekly spot-counts for high-value items, and digital inventory management with automatic stock deductions.