Percentage issue

Ok I am having a day trying to figure out what % i am coming up with

I have a food cost by item and now divide it by the price I sell the item for

Can anyone tell me what this % means

Lets say I have food and paper cost of 3.63 and sell item for 6.00
3.63/6.00=61%

Thanks

That is gross profit percentage.

If many of your items have a 61% product cost it means you’ll be looking for a jub in no time. 60% is fine on some upsell items(sodas) but most here strive to have a product cost under 35%.

This is a church deal just trying to figure out how much I was getting based on this deal.

I run most of my stuff under 33%

Only one item I have is 40% but that includes 2ltr of pop

Thanks

Food cost is the amount of money it costs to acquire the food. Most operators include the cost of paper (packaging materials, boxes, etc) as “food cost”. Food cost percentage is the amount of money to acquire food divided by the net sales (gross receipts minus taxes). This number is more improtant that food cost because it gives you, the operator, a key indicator as to the amount of gross profit your store is making. In pizza, food costs of 25-35% are typical for overall sales. You will, of course, still have items which are far below, or far above those percentages, but it should average about 25-35% overall.

To figure your gross profit, calculate your net sales (usually one week periods work best), calculate your food cost and obtain your food cost percentage, and calculate your labor cost and obtain your labor cost percentage. Add the labor cost percentage together with the food cost percentage and if it is below 100%, you are making GROSS profit. If it is above 100%, you are either a start-up shop, having a really steep promotion, wasting too much food, mismanaging labor, or undercharging for your products. Food cost percent plus labor cost percent will typically range in the 40% (for a really lean company) to 70% (for the average company whose operator is not working shifts instead of his employees).

Tracking percentages on a weekly basis is helpful for determining problems occurring in the restaurant, i.e. theft, wastage, over-topping, etc. When you see the food cost percentage continually increasing over a several month period of time, it is time to increase your prices, find ways of reducing food costs (e.g. price negotations with vendors), or change vendors because food is getting too expensive.

when food costing you have to break everything down and find out what it costs. Lets say you have soup, you’ve got noodles, stock, chicken, celery, carrots, onions, garlic and salt and pepper. You get your chickenstock in a tub and it costs say 25.00, out of that you will be able to make X number of quarts and your soup uses say two quarts, figure out the price per quart. Then figure out what it costs you for each measurement of each ingredient the same way. Lets say that your tub of chicken stock will yeild 150 quarts, it cost 25.00 you divide 25.00 dollars by 150 quarts… 25.00/150, it would cost you .16 cents for each quart of stock
There as an excellent tool out there that helps with food costing items, it is called The Book Of Yields. It is produced by ChefDesk. You can find out more info at www.chefdesk.com. This tool is most helpful when costing out recipies, menuplanning, and many other various things.

I am sorry Red Baron, but your calculation of gross profit is incorrect. For a restaurant, labor is NOT included in gross profit calculations. Gross profit is simply sales minus cost of goods sold.

In a manufacturing setting, labor is typically used in Cost of Goods sold calcs, but not in a restaurant. Cost of goods is simply food costs and usually food supplies.

Guest writes:

This is a church deal just trying to figure out how much I was getting based on this deal.

Unfortunately, with the churches you can’t earn a premium on the pizzas you sell. They keep calling pizza shops until they get the price they want so don’t let them fool you into thinking they’re loyal. It’s not a bad practice because I do the same thing with suppliers, which brings me to my next point:

Lets say I have food and paper cost of 3.63 and sell item for 6.00
3.63/6.00=61%

First 3.63 / $6 = 60.5%. You miss a half percent in your accounting work and you’ve got problems.

Secondly, I’m assuming this is your food cost for a large one item (pepperoni) pizza. If it is, you’ve got some major buying issues. Somehow, somewhere, you’re getting worked by a supplier or two. The food cost for a large (14") one topping pizza should be in the $2.10 range. The food cost for an XL (16") one topping pizza should be in the $2.75 range. These costs are +/- 25 cents depending on the quality of the product you receive.

With that being said… if you’re giving the $6 price to this church for a large pizza with more than one topping, you’re basically giving your product away. No how, no way should you be charging $6 for anything more than a 1 topping pizza… and that’s only if they buy in bulk quantity so you can offset labor to cover the increased food cost percent. Hope this helps. -J_r0kk

Yes DFW I suppose in restaurants “Gross Profit” would conside of net sales minus cost of goods sold (COGS). I have always included labor in the gross profit calculation because that’s how Papa John’s does their calculations (as FLM which is Food, Labor, Mileage). Those items are subtracted from net sales to calculate “Gross Profit”. Either way, I would say you should include labor in the figure for gross profit because net sales minus COGS is essentially the same as calculating food cost which you would have already done do that point. You get no new indicators that way.

I understand what you want to say, but the definition of gross profit is what it is. You may think labor should be included, but it is not.

Here is wikipedia’s definition:

http://en.wikipedia.org/wiki/Gross_profit