Food cost is the ratio of a restaurant’s cost of ingredients and the revenue that those ingredients generate when the menu items are sold.

Knowing your restaurant’s food cost percentage can help you make effective business decisions, like how much to charge for items on your menu for maximum profitability.

**Formula to calculate food cost percentage.**

**Example:**

Suppose your beginning inventory was $ 150, if you bought goods worth $ 30 that day, calculate your food cost percentage if the stock at the end of the day was $ 70 and you made a total sale of $ 300.

Therefore, your food cost percentage is 37%.