Most restaurant owners in Kerala know roughly what they sell in a day, but far fewer can say exactly how much of every ₹100 of sales went into rice, chicken, fish, oil and vegetables. Knowing how to calculate food cost percentage gives you that number. It tells you whether your menu prices still make sense after the last jump in onion or coconut oil prices, and whether the kitchen is using more stock than your recipes say it should.
This guide walks through the two formulas every restaurant should use (one for the whole month, one for each dish) with worked rupee examples, explains the ranges owners commonly aim for, and shows how to read the gap between what your food cost should be and what it actually is.
What food cost percentage means
Food cost percentage is the cost of the ingredients you used, shown as a share of the food sales those ingredients produced. If you used ₹33,000 of ingredients to earn ₹1,00,000 in food sales, your food cost is 33%.
Three points matter before you start:
- Use food sales only. Keep beverages, packaged water, bakery items you buy in and resell, delivery charges and service charges separate. Beverages usually have a very different cost profile and will distort the number if mixed in.
- Take GST out of sales. GST you collect on the bill belongs to the government, not to you. Use taxable value (sales before tax). The CBIC GST portal lists the rates that apply to restaurant service.
- Count what was used, not what was bought. A big purchase of basmati at the end of the month does not mean you cooked it. That is why stock counts are part of the formula.
How to calculate food cost percentage for a period
The period formula is the one you should run every month (or every week, if you can count stock that often). It gives you your actual food cost.
Cost of food used = Opening stock + Purchases − Closing stock
Food cost % = Cost of food used ÷ Food sales (excluding GST) × 100
Worked example: a family restaurant in Kochi
The figures below are example numbers for illustration, not data from a real business.
| Item | Amount |
|---|---|
| Opening food stock on 1st (counted) | ₹1,80,000 |
| Food purchases during the month | ₹6,40,000 |
| Closing food stock on 30th (counted) | ₹1,60,000 |
| Cost of food used | ₹6,60,000 |
| Food sales before GST | ₹20,00,000 |
| Food cost percentage | 33% |
₹1,80,000 + ₹6,40,000 − ₹1,60,000 = ₹6,60,000. Then ₹6,60,000 ÷ ₹20,00,000 × 100 = 33%.
Common mistakes in the period formula
- Skipping the closing count. Using purchases alone makes food cost swing wildly depending on when you stocked up.
- Valuing stock at today’s price for some items and last month’s for others. Pick one method (latest purchase rate is simplest for most restaurants) and stick to it.
- Leaving out credit purchases. Fish and vegetables bought on account from a regular supplier still count in the month you received them, even if you pay next month.
- Ignoring transfers. If your central kitchen sends gravies to two outlets, record the transfer so each outlet carries its own cost.
Doing it in Excel or Google Sheets
Put opening stock in B2, purchases in B3, closing stock in B4 and food sales before GST in B5. In B6 type =(B2+B3-B4)/B5 and format the cell as a percentage. Add one row per month and you have a simple trend line that shows whether costs are creeping up.
How to calculate food cost per dish (plate cost)
The period number tells you there is a problem. The dish formula tells you where. For each menu item, add up the cost of every ingredient in one standard portion, then divide by the selling price before GST.
Dish food cost % = Cost of ingredients per portion ÷ Menu price (excluding GST) × 100
Example 1: chicken biryani
| Ingredient (per plate) | Quantity | Cost |
|---|---|---|
| Basmati rice at ₹120/kg | 200 g | ₹24 |
| Chicken at ₹240/kg | 250 g | ₹60 |
| Ghee and oil | — | ₹8 |
| Onion, tomato, spices, mint, coriander | — | ₹12 |
| Raita, salad, pickle | — | ₹6 |
| Plate cost | ₹110 |
At a menu price of ₹280 before GST, the dish food cost is ₹110 ÷ ₹280 × 100 = about 39%.
Example 2: masala dosa
Batter ₹9, potato masala ₹8, sambar and chutney ₹10, oil ₹4, giving a plate cost of ₹31. At ₹90 before GST, food cost is about 34%.
Neither number is “wrong” on its own. Biryani brings people in and has a higher cost share; dosa costs less as a share of price. What matters is that you know both, so you can decide whether to adjust the portion, the price, or which items your staff recommend.
Do not forget yield
Many Kerala kitchens lose a lot of weight between purchase and plate. If you buy seer fish (neymeen) at ₹900/kg and only about 70% is usable after cleaning and cutting, the real cost of usable fish is ₹900 ÷ 0.70 = roughly ₹1,286/kg. The same applies to bone-in mutton, whole chicken, coconuts (shell and water) and leafy vegetables. Weigh before and after cleaning a few times to find your own yield rather than guessing.
What food cost percentage should a restaurant aim for?
There is no single correct figure, and it depends on your format, location and pricing. Restaurant consultants and industry guides commonly quote a band of roughly 28% to 35% for full-service restaurants. As a general pattern:
- Tea shops, juice counters and snack outlets often run lower food cost because ingredients are cheap relative to price.
- Seafood and meat-heavy restaurants usually run higher because the main ingredient is expensive and prices swing with season and monsoon catch.
- Fine-dining or premium cafes may carry a lower food cost share because the price includes ambience and service.
- Cloud kitchens need to look at food cost together with aggregator commission and packaging, because those can take a big share of each order.
The more useful target is your own: track your number for three months, understand why it moves, and then set a realistic goal one or two points lower.
Actual vs ideal food cost: finding the gap
Once you have plate costs for every dish, you can work out your ideal (or theoretical) food cost: what the month’s food cost would have been if every plate was made exactly to recipe and nothing was wasted.
Ideal food cost = Sum of (plate cost × number of plates sold) ÷ Food sales (excluding GST)
Continuing the Kochi example: say the plate costs and item-wise sales from your billing report give an ideal food cost of 30.5%. Your actual was 33%. The gap is 2.5 percentage points of ₹20,00,000 in sales, which is ₹50,000 of food that left the kitchen without being paid for in the menu price.
Where the gap usually comes from
- Over-portioning. An extra ladle of chicken curry on every plate adds up fast. Use standard ladles and weigh key proteins.
- Waste and spoilage. Over-prepping for a slow weekday, poor fridge rotation, or fish that sits too long. Keep a simple wastage sheet in the kitchen.
- Orders made but not billed. If food can leave the kitchen without a kitchen order ticket, some of it will never reach a bill. Our guide on what a KOT is in a restaurant explains why every order should start from one.
- Staff meals and complimentary items that are not recorded. They are a real cost; record them so you can see them.
- Supplier price increases that never made it into your plate costs. Recheck plate costs whenever a main ingredient changes price noticeably.
- Counting and recording errors. A wrong closing count or a purchase bill entered twice can make the gap look bigger or smaller than it is.
A simple monthly routine
- Count closing stock on the last night of the month, after service, before any delivery arrives.
- Total all food purchases for the month, including credit bills.
- Pull food sales before GST from your billing system.
- Calculate actual food cost %.
- Export item-wise sales, multiply by plate costs and calculate ideal food cost %.
- If the gap is more than one or two points, check the top ten dishes by sales first: portion, waste and billing.
- Update plate costs for any ingredient whose price moved, and review menu prices if needed.
How billing software helps
The maths is simple; collecting clean numbers is the hard part. A restaurant POS that sends every order to the kitchen through KOT, tracks tables and bills, and keeps inventory with low-stock alerts gives you reliable item-wise sales and purchase data without rebuilding it from notebooks. Our overview of restaurant POS software in India covers what to look for, and if you want to go further with recipes and ingredient tracking, read how food cost management software connects recipes, inventory and sales and our note on recipe costing for restaurants.
Caddayn Biller handles restaurant billing with KOT, tables, split bills, QR ordering, GST billing, UPI/card/cash payments and inventory, on Windows and the web. If you would like to see whether it fits your kitchen, download Caddayn Biller and try it with your own menu.
FAQ
Is food cost percentage calculated on sales with or without GST?
Without GST. Use the taxable value of food sales, because the GST you collect is passed on to the government and is not your revenue.
Should gas, electricity and packaging be included in food cost?
Gas and electricity are usually treated as operating expenses, not food cost. Packaging is often tracked separately as well, especially for delivery and parcels, so you can see it clearly. Whatever you choose, keep it the same every month so the trend is comparable.
How often should I calculate food cost?
Monthly at a minimum. Busy restaurants and those with expensive seafood or meat benefit from a weekly count of their high-value items, because problems show up sooner.
What is the difference between food cost and plate cost?
Plate cost is the ingredient cost of one portion of one dish, in rupees. Food cost percentage is usually the cost of all food used in a period as a share of food sales. Plate costs are the building blocks for your ideal food cost.
My actual food cost is lower than ideal. Is that good?
Not necessarily. It often means a stock count was overstated, a purchase bill was missed, or portions are smaller than the recipe, which can affect customer satisfaction. Check the numbers before celebrating.