​Find the food cost threshold that’s right for you

The New Year is a good time to get your restaurant’s financial affairs in order. As you look to gain greater control over your food costs, the formula you use needs to flex to suit your restaurant category and priorities. Does yours? You could start by calculating the cost of every dish on your menu, but you’ll likely get a more accurate cost of a dish against the overall cost of running your business if you use a target based on your cost of goods sold (COGS). Depending on the type of restaurant you run, that COGS will vary. While food costs tend to fall between 28 and 30 percent of total food sales, they skew higher for full-service restaurants, which sell higher-margin alcohol and include a premium for table service, according to the accountancy and business advisory network Baker Tilly. Orderly suggests several ideal COGS targets based on different restaurant profiles. Full-service restaurants should aim for a COGS in the low-to-mid 30s and may find room to trim costs if they manage their bar costs closely and also monitor market prices of fresh, local produce. Bakeries, on the other end of the spectrum, should have a COGS in the low 20s or below — the same goes for pizza restaurants. The challenge in these restaurants is managing food waste and playing close attention to inventory so you’re not over-ordering or buying ingredients at premium prices. Pizza restaurants have the added challenge of watching market prices of fresh ingredients but can manage that with lower labor costs and the addition of higher-margin items to the menu. Ethnic restaurants should target a COGS in the high 20s. While they benefit from less-expensive ingredients like noodles, pasta and rice, they may need to rely on more specialized suppliers of sauces and spices — that’s where they’re more likely to see costs spike. In general, the more specialty offerings you have, such as premium cuts of meat or hard-to-find toppings or other ingredients, the higher your COGS will rise. That’s okay — it’s just important to look for ways to balance those costs with careful inventory and supplier management, menu innovation (especially at the bar) and labor cost management. (Need help? Team Four can advise you in these areas.)