Food & beverage
Food cost percentage
Also written: food cost
What Food cost percentage means
Food cost percentage measures total raw ingredient costs against total food sales revenue over a given accounting period. In hospitality, it tracks how efficiently a kitchen manages inventory, purchasing, waste, and portion sizes to maintain profit margins.
Formula
Food Cost Percentage = (Beginning Inventory + Purchases - Ending Inventory) ÷ Total Food Revenue × 100
How it is used
Operators set target food cost percentages—typically between 28% and 32% for full-service hotels—to establish menu prices and monitor kitchen performance. Revenue managers and F&B directors audit this metric weekly to catch vendor price spikes, kitchen theft, or excessive plate waste early. Deviations above target signal a need to renegotiate supplier contracts, adjust menu engineering matrices, reduce portion sizes, or increase menu prices before overall hotel operating margins suffer.
Worked example
A hotel restaurant starts the month with $15,000 in food inventory, purchases $35,000 in ingredients, and ends with $12,000 in inventory. The total cost of food consumed is $38,000 ($15,000 + $35,000 - $12,000). If food revenue for the month is $115,000, the food cost percentage is 33% ($38,000 ÷ $115,000 × 100), exceeding the target of 30%.
Common mistake
Failing to exclude complimentary staff meals, guest recovery comps, or promotional food items from raw consumption calculations inflates the cost percentage and distorts true kitchen efficiency.
Related terms
Frequently asked
+What does Food cost percentage mean in a hotel?
Food cost percentage measures total raw ingredient costs against total food sales revenue over a given accounting period. In hospitality, it tracks how efficiently a kitchen manages inventory, purchasing, waste, and portion sizes to maintain profit margins.
+How is Food cost percentage calculated?
Food Cost Percentage = (Beginning Inventory + Purchases - Ending Inventory) ÷ Total Food Revenue × 100
+What is an example of Food cost percentage?
A hotel restaurant starts the month with $15,000 in food inventory, purchases $35,000 in ingredients, and ends with $12,000 in inventory. The total cost of food consumed is $38,000 ($15,000 + $35,000 - $12,000). If food revenue for the month is $115,000, the food cost percentage is 33% ($38,000 ÷ $115,000 × 100), exceeding the target of 30%.
+What is the most common mistake with Food cost percentage?
Failing to exclude complimentary staff meals, guest recovery comps, or promotional food items from raw consumption calculations inflates the cost percentage and distorts true kitchen efficiency.