WHAT IS YOUR THEORETICAL FOOD COST
 If you don’t know, you may not have enough control over your food cost. You could be incurring higher losses than necessary.
Theoretical food cost is your ‘actual’ menu cost breakdown by sales mix. It is the calculation of your plate cost and sales volume of each menu item.
It might sound complicated, but it’s really not.
You already calculate your food cost every month by using your stock levels and sales. This tells you what your monthly food cost is.
Your theoretical food cost tells you what your monthly food cost should be.
Your revenues are driven by your sales mix, and so are your menu costs. Sales of higher cost items will drive up your food cost; lower cost items will bring it down.
If you have a run on higher cost items during the month, your food cost might spike. Before you get the guns blazing, use your theoretical food cost to see if the spike is due to sales mix.
Theoretical cost calculations are very effective with multi-unit operations, as well. Unit #1 sells mainly burgers, and Unit #2 sells mainly steaks. Unit #2 would probably have a higher food cost, even though they run the same menu.
Put the following numbers into a spreadsheet to calculate your theoretical food cost:
- Menu Item Name
- Number of Items Sold
- Item Plate Cost
- Item Selling Price
- Item Contribution Margin (selling price – plate cost)
- Item Food Cost % (plate cost / selling price)
- Total Plate Cost (number of items sold x plate cost)
- Total Sales (number of items sold x selling price)
- Total Contribution Margin (number of items sold x margin)
- Total Food Cost % (total plate cost / selling price)
You should already have your plate costs and selling prices done.
So, you set up the spreadsheet once, put the formulas in, and have the columns total at the bottom (divide into menu sections for really accurate numbers). Each month you will only have to enter the ‘number sold’ for each menu item.
If you are able to export your sales numbers from your POS system, then set up your spreadsheet in that order and entering your data will be easy!
Once you enter the sales, subtract your theoretical food cost % from your actual food cost %. Are they close? If not, then you need to analyze where the differences lie.
If you are more than a few percentage points away from your ‘theo’, then you are losing profits. If you are close, you know that your recipes are working and that your staff is doing their job well. You will be able to determine what percentage you are comfortable with.
Sometimes the monthly statement just doesn’t give you all of the answers. Knowing how to calculate your theoretical food cost gives you an excellent advantage to analyzing your food cost.
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