How to Lower Food Costs in Your Restaurant

Food cost measures how much of your revenue goes toward purchasing ingredients. Keeping it down is one of restaurant owners’ biggest challenges, especially with prices jumping from one to another within weeks.

These seemingly small price jumps can eat away at your profits, increase food waste, and complicate inventory even more. Fortunately, with the right kitchen equipment and strategies, you can control your food costs and boost your bottom line.

What Should Your Food Cost Be in a Restaurant?

Food costs in a restaurant tend to fall between 28% and 35% of total revenue. However, the exact amount can vary depending on your menu, location, and even service type. Some establishments also lump food costs with other operating expenses, like paper, packaging, or related food supplies.

For example, in 2023:

• McDonald’s spent 21.96% on food and paper
• Chipotle’s food, beverage, and packaging costs reached 29.5%
• Darden Restaurants (Olive Garden’s mother company) spent 31.99% on food and beverage.

Different restaurants have varying cost structures, but even the most successful ones carefully track and manage food costs. To get a clear picture of your restaurant's financial performance, calculate your food cost percentage regularly.Image Source: Shutterstock

How to Calculate Food Cost Percentage

You can calculate food cost percentage in two ways—by plate or per time period.

Food Cost by Plate (Individual Dish)

Steps:

1. Calculate the total cost of ingredients used to prepare one plate of the dish.
2. Note the selling price of the plate.
3. Divide the cost of ingredients by the selling price and multiply by 100.

This food cost percentage formula helps you understand the cost per serving of each dish. Knowing how much each dish costs helps evaluate your menu prices’ sustainability. You identify which dishes are too expensive to produce or need price adjustments to maximize profits.

Food Cost Per Time Period

Steps:

1. Add all food costs (ingredient expenses) for the selected period.
2. Calculate the total food sales during the same period.
3. Divide total food costs by total sales and multiply by 100.

On the flip side, your restaurant’s food cost percentage for a specific period paints a picture of how much of your total food sales go toward purchasing food. It helps track fluctuations in ingredient prices and food cost trends over time.

Ways to Control and Reduce Food Costs

Once you know your actual food cost, you’ll have a better understanding of what your ideal food cost percentage should be. The next step is aligning your numbers with your goals. Here are some of the best ways to do it.

Use Proper Storage Techniques

Ideally, everything you buy ends up on the plate, not in the trash. However, without proper storage, your ingredients might spoil before they’re used. To ensure your purchases last as long as needed, invest in:

• Refrigerators & freezers
• Airtight containers
• Vacuum sealers
• Food storage racks & shelves
• Labeling systems

💡Pro Tip: Instruct your kitchen staff to mark expiration dates and storage instructions to streamline kitchen operations and minimize waste.Image Source: Shutterstock

Reduce Food Waste

Every bite saved is a penny earned in the food service industry. Uneaten food doesn’t just fill the trash—it drains your profits. To curb waste, try these strategies:

• Use commercial food warmers to reduce spoilage
• Adopt a first-in, first-out system so older stock gets used first
• Identify which menu items perform or underperform
• Turn excess ingredients into daily specials, soups, or side dishes
• Train staff on waste-conscious prep, storage, and portioning techniques

🍽️Read More: 8 Ways to Reduce Food Waste in Your Restaurant

Track Inventory

Monitor food inventory closely to prevent overbuying, understocking, and unnecessary expenditure on forgotten ingredients. Schedule weekly or biweekly checks to monitor stock levels and identify what’s nearing expiration.

Negotiate Deals With Suppliers

Keeping food cost percentages low often comes down to your deals with suppliers. Negotiating smartly can lead to significant savings without compromising quality. Here are some ways to approach it:

• Buy in bulk to earn discounts and reduce per-unit food costs.
• Build strong, honest relationships with suppliers to unlock better pricing and terms.
• Don’t settle for the first offer. Research multiple suppliers to ensure you’re getting competitive rates.
• Ask suppliers about early payment discounts, seasonal specials, or holiday sales that can lower your expenses.
• Opt for fewer deliveries to cut transportation and handling costs.
• Partner with other local businesses to buy in bulk and share the savings.
• Track market prices and commodity trends to time your purchases strategically.

💡Pro Tip: Remember, the lowest price isn't always the best value; consider quality and reliability too.

Maximize Profits, Minimize Waste with s.t.o.p. Restaurant Supply

Every dollar you spend on food cost expenses is money you're not making. Your kitchen equipment can be the difference between slim margins and robust profits. s.t.o.p. Restaurant Supply helps restaurants turn this vision into a reality with professional-grade storage solutions designed to boost efficiency and minimize waste.

We’re your one-stop shop for everything kitchen-related. Our extensive online catalogue features top-brand equipment designed to help restaurateurs and chefs:

Reduce food waste with premium storage systems

Optimize kitchen operations with commercial-grade tools

Save money through monthly promotions and unbeatable deals

Invest in quality kitchen equipment and turn your business into a lean, profit-generating machine. Shop at s.t.o.p. today or contact our experts for special equipment orders tailored to your business!