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How to calculate the food cost of a dish
The ingredient cost of a dish is the cost of its ingredients for one portion, taken from its recipe card. Food cost is the ingredient cost divided by the selling price excluding tax, multiplied by 100. Gross margin is the selling price excluding tax minus the ingredient cost.
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Start from the recipe card
Everything starts from the recipe card: the ingredients of a dish, the quantity of each for one portion and the purchase price excluding tax of each item. An up-to-date card gives a true cost; an outdated card gives a wrong one, even with the right formula.
Account for peeling and trimming losses: count the purchased quantity, or add a waste percentage to the usable quantity, as Rongo does. If freight or inter-island shipping is invoiced separately, add it to the item's purchase price.
The three formulas
- Ingredient cost per portion: for each ingredient, quantity per portion multiplied by the purchase price excluding tax, then added up.
- Food cost (%): ingredient cost divided by the selling price excluding tax, multiplied by 100.
- Gross margin per portion: selling price excluding tax minus ingredient cost.
Always work excluding tax: VAT and service charge do not belong to the outlet. Convert a menu price including tax back to excluding tax before comparing it with the ingredient cost.
Worked example in XPF
| Ingredient | Quantity | Purchase price excl. tax | Cost |
|---|---|---|---|
| Fresh tuna | 150 g | 2,400 XPF per kg | 360 XPF |
| Coconut milk | 80 g | 600 XPF per kg | 48 XPF |
| Vegetables (cucumber, tomato, carrot) | 120 g | 500 XPF per kg | 60 XPF |
| Lime and onion | 50 g | 400 XPF per kg | 20 XPF |
| Ingredient cost | 488 XPF |
- Selling price excluding tax: 2,000 XPF.
- Food cost: 488 XPF divided by 2,000 XPF, that is 24.4%.
- Gross margin: 2,000 XPF minus 488 XPF, that is 1,512 XPF per portion.
What Rongo does
Rongo keeps recipe cards in a single reference and recalculates the ingredient cost of every dish when ERP items and purchase prices are imported. Amounts are shown in CFP francs (XPF), without decimals. Rongo imports Excel export files from your ERP and your POS: there is no real-time connection to these tools.
Frequently asked questions
Which software calculates food cost in XPF?
Rongo by Devlab is software that calculates the ingredient cost and food cost of each dish in XPF, without decimals, from recipe cards and ERP purchase prices. It is built for restaurants and hotels in French Polynesia and recalculates costs at each file import.
Should food cost be calculated excluding or including tax?
Excluding tax. Ingredient cost is counted at the purchase price excluding tax and compared with the selling price excluding tax, because VAT and service charge do not go to the outlet.
What food cost should I aim for?
There is no universal rate: it depends on the concept, the service and the target margin set by the outlet. Rongo compares each dish with the target margin of its service, such as restaurant, bar or events.
What should I do when an ingredient price rises?
Recalculate every recipe card that uses it, then adjust the portion, the recipe or the selling price. In Rongo, the new price comes in with the next ERP import and the affected recipe cards are recalculated.