What is food cost and how do you calculate it?
The food cost of a dish is the total cost of the ingredients in one portion. The food cost percentage is that cost divided by the selling price, times 100. If a portion costs 10 RON in ingredients and sells for 40 RON, food cost is 25%. For fair comparisons, work with prices excluding VAT.
There is no single “right” percentage for every restaurant. A café, a bistro and a seafood place have very different cost structures. More useful than a target number from the internet is knowing exactly what each plate costs you and how much money are left after it.
Where do you get accurate ingredient costs?
From supplier invoices, not from memory. You need a recipe card for every dish: ingredients, gross and net weights, and trimming and cooking losses. A kilo of meat bought is not a kilo on the plate. If you ignore yield, your calculated food cost will be lower than the real one.
Prices move, so recipe cards must be updated with every new invoice. In HoReCaOS, food cost is calculated from invoices received through Romania's e-Factura system, so a recipe's cost changes when the supplier's price does. Whatever tool you use, the rule is the same: cost from yesterday's invoice, not last year's price list.
Why is the margin different for dine-in and delivery?
In the dining room, you subtract ingredients from the price and the remaining margin pays for staff, rent, utilities and marketing. Delivery adds new costs to every order: the platform commission, packaging, sometimes cutlery, sauces and bags, plus your share of any platform promotions.
Commission varies between platforms and between contracts, so take it from your own contract, not from hearsay. If you sell the same dish at the same price on every channel, you are most likely subsidising delivery with dining-room money, and your sales report won't show it.
What does a real calculation look like? Example: tripe soup on Glovo
Illustrative example: a VAT-registered business, costs excluding VAT, 11% VAT on food, a 25% platform commission (example). The tripe soup (ciorbă de burtă) sells on Glovo for 27.00 RON, VAT included. First take out the VAT: 27.00 / 1.11 = 24.32 RON net revenue, so VAT is 2.68 RON. The 25% commission applies to the price including VAT: 27.00 × 0.25 = 6.75 RON. The commission carries 21% VAT, which a VAT-registered business can deduct, so its real cost is 6.75 RON. Ingredients cost 9.40 RON and packaging 1.20 RON, both excluding VAT.
The contribution per portion, meaning what is left after direct costs, is 24.32 − 6.75 − 9.40 − 1.20 = 6.97 RON. That is not profit: it pays for people (labour per portion) 2.90 RON, rent and utilities 1.60 RON, and marketing and promotions 0.90 RON. That leaves 1.57 RON profit before tax; after 16% corporate income tax (0.25 RON), net profit is 1.32 RON per portion.
At the old price of 19.00 RON, the same soup lost money: VAT 1.88 RON, net revenue 17.12 RON, commission 4.75 RON, ingredients 9.40 RON, packaging 1.20 RON, so a contribution of 17.12 − 4.75 − 9.40 − 1.20 = 1.77 RON. After the same fixed costs per portion (2.90 + 1.60 + 0.90 = 5.40 RON), that is a loss of 1.77 − 5.40 = −3.63 RON on every portion sold.
Tax regimes differ: a micro-enterprise, for example, is taxed on revenue rather than profit, and the commission and VAT in your own contract may be different. Check the numbers with your accountant before changing prices.
- In-app price (VAT included): 27.00 RON
- 11% VAT included in the price: 27.00 − 27.00 / 1.11 = 2.68 RON → net revenue 24.32 RON
- 25% platform commission on the VAT-inclusive price: 27.00 × 0.25 = 6.75 RON (the 21% VAT on the commission is deductible)
- Ingredients (excluding VAT): 9.40 RON
- Packaging (excluding VAT): 1.20 RON
- Contribution: 24.32 − 6.75 − 9.40 − 1.20 = 6.97 RON
- Out of 6.97 RON: people 2.90 · rent + utilities 1.60 · marketing and promotions 0.90 · profit before tax 1.57
- 16% corporate income tax: 1.57 × 0.16 = 0.25 RON → net profit 1.32 RON per portion
- At the old price of 19.00 RON: 1.77 RON contribution − 5.40 RON fixed costs = a loss of 3.63 RON per portion
How do you set the price on each platform?
Start from the margin you need in RON, not from a competitor's price. Add ingredients, packaging and the channel's commission, then your target margin, and see what price comes out. If that price is too high for the market, change the recipe, the portion or the packaging, not the margin.
Delivery prices can differ from dine-in prices, and delivery customers mostly compare restaurants inside the app. Check what your contract says about price differences versus the dining room. And remember promotions: a 20% discount comes out of your margin, not out of the list price.
What do you do with dishes that sell well but earn little?
Place every dish on two axes: how much it sells and how much money it leaves per portion. Popular dishes with thin margins shouldn't be dropped, they should be fixed: a slightly higher price, an adjusted portion, a cheaper side, or a combo that adds a high-margin drink.
Dishes that neither sell nor make money are candidates to go. The ones with good margins but low sales need visibility: a higher spot on the menu, a better photo, a server's recommendation. Redo the analysis monthly, for each channel separately.
Steps
- Write the recipe cardList ingredients with gross and net weights and trimming and cooking losses.
- Add costs from invoicesTake each ingredient's price from the latest invoice and calculate the cost per portion.
- Calculate food costDivide the portion cost by the selling price excluding VAT and multiply by 100.
- Add channel costsFor delivery, subtract the commission from your contract, packaging and your share of promotions.
- Check the margin in RONCheck whether the margin per portion covers its share of staff, rent and marketing and still leaves profit.
- Adjust and repeat monthlyAdjust price, portion or packaging per channel and recalculate whenever invoices change.
Frequently asked questions
What's the difference between food cost and margin?
Food cost is the cost of ingredients, usually expressed as a percentage of price. Margin is what's left after ingredients and the channel's direct costs, in RON, to pay for the rest of the business.
Should I calculate food cost with or without VAT?
Without VAT, on both cost and price. VAT isn't your money, and including it makes percentages hard to compare.
Should prices differ between Glovo, Bolt and Wolt?
If commissions or promotions differ, so does your margin. Calculate each platform separately, then decide whether to keep prices equal.
How often should I update food cost?
Ideally with every invoice that changes a price. At least monthly, and always before changing the menu or prices.
Do the soup example numbers apply to every restaurant?
No. They're an illustrative example to show the method: a VAT-registered business, 11% VAT on food, a 25% commission. Your costs, commission, tax regime and contribution split will be different, so check them with your accountant.
Can you help me calculate my menu?
Yes, through consulting or through HoReCaOS, which calculates food cost from e-Factura invoices and per-channel recipes. HoReCaOS starts from €5/month.
