So we said earlier that you want to run a 30% food cost in order to pay your overhead and turn a profit. That's true...kind of. It's a good starting point, but in reality it's more complicated than that.
Let's look at some exceptions to the rule of 30:
- You have a linguini dish that costs you $5 to make and you sell for $15. Then you have a rack of lamb that costs you $16 and you sell for $38. You run a Pricing Analysis in reciProfity (from Recipe Manager click on Tools) and see this:
So that lamb is way above our 30% target. What do you do? You can't really increase the sales price because you know that customers in your market won't accept it. Do you take it off the menu because you can't make it work? No way! Food cost percentage is one thing, but take a look at the contribution margin of these items.
Contribution Margin (sales price - food cost):
That lamb is more than twice as profitable as the pasta! For the same amount of work, the lamb give you $12 more than the pasta to pay your overhead. In this case we don't care what the percentages say. Sell as much of that lamb as you can. As our CEO Matthew likes to say when doing training, "You take dollars to the bank, not percentage points!"
- You run a food truck or a takeout joint. You enter all your ingredients and recipes into reciProfity and the software tells you to sell your burger for $12 to hit your 30% food cost. That might be fine in a restaurant with waitresses and comfortable chairs, but nobody in your neck of the woods is paying 12 bucks for a burger on the street.
But luckily for you, your fixed costs are FAR lower than they would be in a restaurant. You run a breakeven analysis and find out that you can cover your fixed costs by running a 40% food cost and selling that same burger for $9. Go ahead and edit your settings so that your default global food cost or the default food cost of that category is 40% and use that as your benchmark.
- Meat rules most menus. The problem is, meat is expensive. Go ahead and run a pricing analysis of your current menu [link to PRICING ANALYSIS]. How many of your entrees with meat at the center of the plate have a food cost higher than 30%? A bunch, right? This is not the end of the world. The goal is to have your whole menu average out at 30% food cost. How do we make that happen?
-Your veal chop has a 50% food cost. Add some cheap, delicious veg or potatoes to the plate, raise the sales price, and all of a sudden it's got a 40% food cost and a bigger contribution margin.
-Make sure your staff is pushing sides of fries with the burger. The burger might have a 40% food cost but the fries should be at maybe 15-20%. It evens out.
- Even if your more expensive entrees average out to 40 or 50% food cost, it's not necessarily a problem. Those items are called loss leaders because even though you're not making much money on them, they lead to sales of other, higher profit margin items. Your costs on coffee, cocktails, beer, and soft drinks should hover around 10-20% (wine is usually higher), and appetizers and desserts are almost pure profit. As long as you're selling enough of them, those items will pull your average food cost back to 30%. So in your Category settings , you can keep your target food costs for Entrees at 40% but drop the Appetizers and Desserts to 15-20%.