Food & beverage
Food cost percentage
Also written: food cost
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.