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ideal food cost percentage

D

daisy

New member
OK, so our accountant came in for are quarterly paperwork, and said I dont know how you are doing it but you are running at 27% - 29% food cost, I said ummmm, is that bad or good ?? In my mind thats good am I correct. I have looked over our monthly sales for the last 5 yrs, just prior to the tank in the economy, in 07’ - 08’ our sales we up, then in the later part of 09’ thru the start of this new yr, they dropped drastically, then since February are sales have been climbing back towards the way they were in 07’. Not sure, yeah we have made a few changes in the way we do things but for the most part the only thing I see that has changed was food cost have gone up especially cheese. We also have switched to pizza in a bag rather than boxes, we only use boxes for customers who order more than 1 pizza and deliveries. I also buy locally when needed which is about every 3-4 days things such as produce and small items that my supplier cant compete in pricing, to me 27%-29% is good
 
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The “ideal %” will depend on a lot of other factors…IIMO is mainly the type of competition you have…Sometimes to compete you have to up your quality some but because your market is price sensitive you may not be able to recover the extra costs across the board…The most important number of all is the “bottom line”…You may be able to pare down some of your line items to “ideal %” but if that does not carry to your bottom line you need to be less mindful of the %s and tweak your operation to make the most of your bottom line…

As an example, many set a certain marketing %…I (somewhat biased) disagree with this approach…I say spend all you can so long as it drives sales…So as far as the food cost %, if you increase your food cost a few % point but at the same time increase sales because you are giving better value, you are usually ahead of the game…
 
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We really dont spend much on advertising, we dont do mailers, or door hangers, we are in a rural area, we did cut back on our cheese weights by 1oz on everything, I know it does not sound like much but it adds up over time, I have a program (IPRO) that we input all our ingredents and recipes into and it costs it out for us, telling us the percentage of sales price I try to keep it around 33%, on alot of items, I would say that 80% of our menu is at 33%, 10% is higher and the other 10% is lower, I have not updated it in awhile, Im just happy business is picking up 🙂
 
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First, you are talking about Total Cost of Goods Sold (COGS) and not just Food Cost, right? 27% would be excellent in my opinion for COGS. It would be good/average for just food cost (as you probably add 2-3 points for paper, etc.).

Second, are you strictly DELCO or dine-in? What percentage? Is your price point competitive with chains or are you charging a premium?

Finally, remember, it’s ultimately about the contribution margin and not percentages. I’ll sell $50 steaks at 50% food cost all day v. $20 chickens with 25% food cost.

pC
 
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According to my account it is “food cost”. We are strictly takeout; rarely any delivery because we have such a great location on the main road nestled in between two small towns that everyone in either town drives right by us they would rather pick up than have delivered. Also no competition with chains within 7-10 miles, Are pies are a little more expensive, and my motto is you get what you pay for, and we have 100% the best for miles, we even have customers traveling over 20 miles to just get our pizza, and yes I am tooting my own horn 😉 We won “Best In Pizza” 4 yrs in a row in our county
 
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When we do cost we are looking at all food, supplies, paper, condiments etc. When we are doing well, we can get that down to 29%. 27% would be really great and in 14 years we have never hit that. If the cost is just food (no paper or supplies) then I would consider 27% to be on the high side but not by much.
 
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That percetage is based on everything (food & packaging), anything that goes out the door
 
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I running between 26% and 27% right now, but I bet my prices are higher than at least 95% of the people here.

I’m able to charge a high price because I’m in a high priced area, but along with that comes a much bigger rent bill than most of you pay, and probably higher labor costs too.

So my low food cost percentage is offset by my higher overall cost of doing business. Always be sure to compare apples to apples.
 
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I agree with Piper. Apples to Apples.

My COGS are probably lower than many here, but my overhead is also higher than most here.
 
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Every few months, we start a similar thread, with many good insights…

But as the title says “food costs” IMHBCO, this should only be tracking items that are ingested…not to include packaging etc.

As a former USMC Auditor, I want to track trends, be they rising food, labor or any other costs…

Trend analysis thru proper P & L source documents is a great key to understanding any business…

Simple %'s have their place, but if I want to fine tune my business or achieve a better valuation when it come to selling the biz, the more subtle data on hand is generally desirable…

That said, we run a higher food cost, in the low 30’s, but feature quality products with a volume pricing structure…

Semper Fi!
USMC Area Auditor, IGB, 3rd MAW, El Toro, CA
 
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In my campus shop where i have some offers for 12" 1 topping pizzas for $4.99 I run average of 32% food. Depending on your pricing model I would say your doing well. But food % is not how you make money in this business. I have a buddy who runs 39% but since he does well over 30K a week in sales and his labor is 18% he makes money hand over fist.
 
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