FOOD COSTS AND HOW TO GET A RETAIL PRICE
Why do we need a food cost?
Part of becoming a Chef is to learn how to deal with the money site of cooking. In Trades school we learnt the inns and outs of costing a dish to establishing a retail price for the menu. A basic good knowledge of mathematics was essential for us to have. We where not allowed to use pocket calculators or computers. Everything calculated using your brain, thought us to be able to quickly do a food cost calculation and a retail price.
Back in my days we did not have computers, mobile phones, the Internet, and pocket calculators where very expensive. I remember when my Dad got his first pocket calculator, he paid $ 800 for it. Today you can get a pocket calculator for a few dollars. Once I was in my last year of apprenticeship, I had a pocket calculator and it still cost about $ 70 but I was not allowed to use it at work or school. Been able to calculate with my brains instead has tremendously benefited me throughout my career as a qualified chef.
So having a food cost it a very important step in calculating a retail price. The food cost in % to the retail price which is 100%.
That 100% has to cover the cost of the dish, running cost of the restaurant like rent, electricity, water, gas, beverages, crockery, equipment and maintenance, wages, suppliers and taxes. At the end you want to have a net profit. (A net profit is money left over after everything is paid.)
How low or high should the food cost be?
First, a low food cost without jeopardising the quality of the dish is always the preferred outcome. In other words, the food cost should never be above 30% . That is also not always possible. I give you 2 examples.
Eye fillet steak grilled with vegetables, mash potatoes and a mushroom sauce. Cost: $19.60. Asking price for this dish is $ 36.50. Your food cost is over 50%! The asking price is the price other restaurants and hotels sell this dish, been higher may result the costomers not ordering that dish.
Egg omelet (3 eggs) with fine diced vegetables. Cost: $2.15 Retail price $11.90. Your food cost is just below 20%.
This does not mean, that only dishes with low food costs should be on the menu. It means, that you can offer dishes with a higher food cost and have some other dishes with a very low food cost like: chips, salads, soups, side dishes like mash potatoes, mixed vegetables, sauces
The menu card should have an average food cost of not more than 28 to 30%. To get to that figure, add up all the cost prices of everything on the menu card and add up all the retail prices on the menu card for all food items only. Here is an example:
Total cost of all food items on the menu card is: $ 200
Total cost of all food retail prices on the menu card $ 685
1 % of the total retail price is $ 6.85
Divide $ 200 by 6.85 equals 29.2 % which is the overall food cost.
How we had to learn how to calculate the cost of a dish
Calculating the food cost includes every single ingredient for the dish. Seasonings, oil for cooking, stocks for cooking, everything. The food cost is calculated for a single serve dish. Here is a short example:
1 side serve of mash potatoes: Retail price $ 6.00
Costs per serve:
300 gm of large potatoes $ 0.54 1 kg $ 1.80.
200 ml of milk $ 0.22 1 Lt $ 1.10
100 gm of butter $ 0.34 1 kg $ 3.40
Seasoning $ 0.20
Garnish $ 0.10
Total cost of side serve mash is $ 1.40 which is 23.33%
I am aware that the calculations for cost and retail price may vary from country to country and restaurants to hotels. This examples I am using is what we had to learn.
Not only cooking the food is important, knowing the cost to the retail price is the most important factor for a successful operation. When we chefs put up a specials menu changing from day to day, we need to make sure that we maintain a good to excellent food cost.
Next week I write about on how we got drilled on the presentation of a dish on a plate. Until then, you have a fantastic week, enjoy life and great food. Cheers
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