Solicit only on quality products that you can sell within a certain upcoming time period. That is unless you precisely track the sales of each menu item. Keep a close eye on menu items sell-through Buying in bulk can be an efficient strategy to reduce your food cost and supplies that have a long shelf life or turn over fast in your restaurant. Some restaurants buy specific products in bulk to take advantage of supplier discounts.
The dilemma is determining how to do so without sacrificing the quality of your menu items. You want to be able to maintain consistent food sales while allocating a lesser portion of that money spent to inventory food costs. If your COGS is $0, for example, that indicates you didn't sell anything.
It is important to note that reduced COGs are not necessarily a good thing.
Use software to manage inventory trends in your restaurant.Thus, it is a great advantage to look into ways to reduce the cost of goods sold. How to Lower Your Restaurant Cost of Goods SoldĪ lower food cost figure typically indicates a higher profit margin for your restaurant. This number should be considered as a cost and should be subtracted from your gross revenue. This means you spent $1,200 to produce your dishes. So now, we'll equate these variables to the given formula to calculate cogs.ĬOGs = Beginning Inventory + Purchased Inventory – Ending Inventory Calculate cost of goods sold & Cost of Goods Sold FormulaĬOGs = Beginning Inventory + Purchased Inventory – Ending Inventory And by the end of it, you had only $3,000 worth of total stocks. When you started the month, you bought $6,400 in additional inventory buy. There was still $8,200 worth of food costs, beverages, and other stuff in your inventory purchases at the beginning of the month that including everything that goes into making a meal plan or a drink to sell. Understanding the restaurant cost of goods soldįor clarity, let's look at an example below.įor instance, at your last month's inventory taking. Purchased Inventory: The monetary value of the inventory purchases you make for the next period.Įnding Inventory: At the end of your time period, you calculate the monetary worth of any leftover inventory.
The following formula is used to calculate Cost of Goods Sold:īeginning Inventory + Purchased Inventory – Ending Inventory = Cost of Goods Sold (COGS)īeginning Inventory: This is the monetary value of the inventory left from the previous period (day, week, month, or year). It is critical to keep track of your COGs on a regular basis to ensure sufficient profit. Moreover, your COGs for the same items are likely to fluctuate in a certain period either weekly, monthly, or even in a year since the cost of the product also varies depending on the season. This calculation enables restaurant owners to keep lean and maintain costs low and allows them to save money on food inventory by observing patterns and trends. What is the Cost of Goods Sold for Restaurants?Ĭost of goods sold (COGs) is the overall cost of all ingredients used to prepare a menu item, which includes sauces, garnishes, and other condiments.Ĭalculating COGs basically comes down to calculating the cost of ingredients or restaurant inventory within a certain time period. Calculating a restaurant's cost of goods sold in a constant manner can help you in determining how much is spent on a certain dish in a specific time period. In this post, we'll go over the significance of COGs, how to calculate them, and how to reduce your COGs.Ī restaurant owner may have estimated the Theoretical Cost of the menu items beforehand, but take note that this is just only an ideal expenditure and does not take into account waste, food spoilage, inconsistency, or shrinkage. In a nutshell, it is the cost of food used in the preparation of your menus. To be successful, it takes constant monitoring and numerous procedures, and one of the most important components of the overall operation is analyzing your cost of goods sold (COGS), which is directly relevant to your inventory, menu engineering effort, profit margin, and revenue.