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Restaurant Kitchen Design | How to Create a Food Cost Analysis

How to Create a Food Cost Analysis

by Victor | Feb 6, 2017 | Restaurant Development

The food cost analysis is the first step in creating a restaurant budget,
and its value cannot be understated. The vast majority of restaurants
restaurant budget costing analysis food cost
that fail are the result of not having an intimate understanding of the
costs associated with running the restaurant. Created properly, a food
cost analysis can act as an ongoing tool to monitor your business costs
so you can charge your guest appropriately to ensure you hit your profit
margins.

Creating a food cost analysis is similar to most other business cost of 2

goods sold (COGS) budgets. However, foodservice requires a bit more
digging to find certain numbers, so we are going to break it down for
you step by step. I hope it goes without saying that everything we are

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doing here is done on a computer; pen and paper will take 1000 times
longer to complete this process.

Menu Breakdown

If you’ve read any of our other posts you know that our restaurant
kitchen design process always begins with your menu and needless to
say, so will your food cost analysis. This should begin as a three-part
process. I am not going to sugar coat it, it is time consuming; but once it
is done, your life will become much easier as you create your budget
and business plan.

1. Write your menu out as you would present it to your guests. This
×
gives you the opportunity to work through a dish to see what works
and what doesn’t.

Example: Roast Chicken Pasta e Fagioli

Roasted breast of chicken, stewed together with pasta, beans, and

fresh vegetables, garnished with Parmesan cheese, and served with
focaccia bread.

2. Once the “guest menu” is completed, then rewrite your menu as

listed components. Think of it as if you were giving it to a cook to
set up a station to make the dish.

Roasted breast of chicken

Pasta
Kidney beans
Vegetables
restaurantParmesan cheeseanalysis food cost
budget costing
Focaccia bread

3. Now that you have the dish separated into components, you can
now start writing recipes for each component because you will
create separate a separate food cost analysis for each component
of a dish. Obviously if a component is not something you are going
2
to make, such as the Parmesan Cheese, then don’t worry about
that. It will be added as an ingredient in to food cost analysis later
on.

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*TIP: As you write your recipes, write them out in the same format in
which you purchase them. This is typically weight or liquid
measurements, not volume. For example: you purchase the flour to
make the focaccia bread in pounds, so your recipe should be in
pounds or ounces, not cups or tablespoons.

Food Cost Analysis

Now that you have the recipes all written out for each component, we
can create the food cost analysis. You will need to create a recipe

×
costing analysis for each component, then an analysis for the menu
item itself, since it is comprised of ingredients and components. If you
were creating a menu item such as a “Fresh Fruit Cup,” you could
simply create a food cost analysis of the final dish since there are only
ingredients and no components. Following me? OK, good.

You’re going to need to use some form of spreadsheet document that

has calculating capabilities like Microsoft Excel or Google Sheets. We
use Excel, but I believe Sheets functions in pretty much the same
manner. You may be able to find some food cost analysis templates
online to make life simple, but if you are experienced with Excel, it may
be easier to build your own than to edit someone else’s template.

As you can see by the sample image, it is reasonably self-explanatory.

Each ingredient of a recipe is listed individually with the quantity used,
then a cost is associated to the ingredient in the same format
purchased (pounds/ounces, grams/kilograms).

restaurant budget costing analysis food cost

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The column that may not be so self-explanatory is the Yield %. The Yield
% accounts for any loss of product based on either fabrication or
cooking, and adjusts your total recipe yield and cost accordingly. For
example: You don’t use an entire watermelon, typically only the inner
red flesh, or if a beef stew recipe calls for 10 lbs of chuck, once meat is
cooked, you typically lose 20% of the volume so your final yield of
sellable meat is 8 lbs. If you don’t account for the yield percentage
reduction, your total recipe volume calculations will be off and you will
think you have more portions than you actually do for any respective

×
recipe. Since we would be selling say a 12-ounce portion of beef stew,
your number of portions per recipe will be overestimated without
accounting for the yield %.

When you are creating your ingredient list, it is very important to

account for every item that will go into creating the final dish sold. If
your menu consists of take-out items, accounting for things like plastic
cups, lids, napkins, etc.; all cost money so they need to be accounted
for in the cost of goods sold price.

Don’t Want To Create Your Own Templates?

Go to our Business Resources page to Purchase a Downloadable copy

of our

Food Cost Analysis or Budgeting Templates in Microsoft Excel.

Indirect Food Cost Expenses

There are also kitchen expenses that cannot be quantified in a recipe,
restaurant
butbudget costinggoanalysis
that indirectly food it.
into making cost
Such as hand soap and paper
towels from washing your hands, dish soap to wash the dirty pans, soap
to scrub the floor, etc. Since the expense of these items goes into
making the dishes, they need to be accounted for, so we add a
separate non-ingredient item and call it “Utility.” The cost associated for
the Utility will vary from restaurant to restaurant, but for the purposes of
the initial food cost analysis, we recommend a range of $.10 up to $3.00 2
for each menu item. Once you are open for a few months, you can
figure out a more exact cost by calculating how much money you
spend on average monthly for these items, and divide that total
amount by total number of dishes sold on an average month.

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Once you’ve completed this process for each recipe or component,

you can then create an analysis for each menu item, using your
component cost per portion or cost per ounce as your ingredient cost in
the menu item. If we were serving beef stew, with roasted potatoes on
the side for example, beef stew the component, now becomes the
ingredient and you can input either your cost per portion, or cost per
ounce if you have multiple portion sizes.

Food Cost Budgeting

×
Now that the food cost analysis is complete for all recipes and dishes,
you can figure out your average food costs (20%-25%, or lower is ideal),
disposable costs, beverage costs, or whatever you feel is most
appropriate for your concept and budget forecasts.

If you will also be retailing items that will be sold in the same format that
you purchase them in, such as say protein bars for a health club cafe,
you should create a similar COGS spreadsheet for these items as well.
This will be beneficial when you create your overall expense and sales
forecasts in your restaurant budget.

*TIP: If you are familiar with Excel, you can easily create an inventory list
based on your ingredients and send that list to your potential vendors
and ask for pricing. Once you receive the pricing back, you can plug
those numbers into your list and link them to the cost cells for your
ingredients. This can be a little time consuming based on the size of your
menu, but once it is done, when the cost for ingredients changes, you
can simply change the case cost in your list and it will change your
costing analysis to reflect the change in total food cost.

restaurant budget costing analysis food cost

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As a current or future restaurant owner, you know that everything costs

money,
restaurant andcosting
budget understanding
analysisexactly where the money is going is the first
food cost
step to ensuring a profitable bottom line. We hope you see this as more
of a tool for your business more so than a necessary task that must be
completed. If you understand the importance of creating an accurate
food cost analysis, but simply don’t have the time or are not
comfortable with spreadsheets, please Contact Us and we will be
happy to guide you through the process. 2
We’ve helped develop dozens of business plans with clients over the
years, and know how daunting of a task it can be when you are starting
from scratch. We always recommend using a software platform to make
things easier after you’ve completed your food cost analysis, using our

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9/22/22, 4:08 AM How to Create a Food Cost Analysis | Mise Designs

Free Food Cost Calculator. Palo Alto Software has several programs to
help entrepreneurs develop their business, sales and marketing plans
that you can also view on our Business Resources page.

Post Tags: budget | business plan | consultant | development |

food cost | menu | restaurant

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