Geez... Food Cost!

Often when Chefs hear the word Math, they cringe.  You see a lot of people who are Chefs or aspiring to be chefs are those who are not into sitting down in a classroom and spend hours studying.  A lot are more visual.  Even for me, thinking about multiplication, division, addition and subtraction is a headache.  I literally hate math.

But as a Chef, it is important to know about math.  You use it everyday.  In recipes, in scaling, in knowing how many guests you're serving and how much you need to prepare.  Everyday you are using numbers.  In the end, if you're running your own kitchen, you will have to know about Food Cost.

Food Cost sounds like a big task but honestly it's not.  It's just like basic accounting.  Why is it important?  In every food organization or business, it is important to know how much you are spending in order to know whether you are earning a profit.  Food cost is not only for professionals but it should even be used daily by home-bakers or even small businesses.

How do you know your food cost?

You need to know how much you're spending.  Your cost are based on recipes, so it is important to have an accurate recipe and using a certain system of measurement.  In my kitchen, I use grams.  It is more accurate and it will assure me that everything I produce will exactly come out consistent as opposed to using cups and tablespoons.  Like for an example in a recipe (btw, these are random numbers, it is not a recipe for cookies), you've used 300 grams of flour, 4 pieces of eggs (at 50 grams per piece of egg), 200 grams of butter and 200 grams of sugar. You've made 4 dozen cookies from this recipe, how much are you going to sell it?

To start of with, start creating a price list.  You can create one using excel or numbers.  Even a Costing sheet can be done in a computer.

I keep one like this on my file and would update it ever so often.



Then, you would start to compute on how much each item cost.

Flour = 35pesos per kilo = (35/1000) x 300 = 10.5 pesos per 300 grams
Eggs = 6 pesos per piece = 6 x 4 = 24 pesos
Butter = 120 pesos per 225 grams = (120/225) x 200 = 106.67 per 200 grams
Sugar = 88 per 2 kilos = (88/2000)x200 grams = 8.80 pesos per 200 grams

When you add it all up, one recipe cost = 149.97

Now this will be your food cost.  In most kitchens, we add up inflation ratio at 10%.  Usually prices increase on a daily or weekly basis.  A bag of flour might cost Php35 today and it might cost Php38 the next time you buy it.  Also sometimes it varies from which supplier or store you get it.  Putting a 10% Inflation Ratio will help you cover up the cost in case that there is a surge of prices and knowing you don't have to re-do all your food cost in all your recipes.  But if the surge is more than the 10% of your inflation Ratio, you might need to increase your prices.

How do you get your inflation ratio?  The formula is just your Food Cost x 10% which is your inflation ratio and to get your Total Food Cost you add your Food Cost and Inflation Ratio.

Food Cost x Inflation Ratio % = Inflation Ratio  
149.97 x 10% =  14.997 or 15php

Food Cost + Inflation Ratio = Total Food Cost
149.97 + 15 php =  164.97 Php

Now that you have your Food Cost, how do we know how much to sell?

As stated earlier, your recipe produces 4 dozens of cookies.  that means it's 48 pieces.
You can divide your food cost into 48.

164.97 / 48 = 3.44 per piece.

164.97 / 4 = 41.24 per dozen.

To compute for Selling price, you need to know your Food Cost Percentage or Cost of Sales (Meaning the expenses)

If you have set you Food Cost Percentage as 30%, your Selling price will be at a 100% you can divide your food cost together with your food cost percentage in order to get a 100%

Example: 30% is .3

164.97 total Food Cost /.3 = 549.9 for all 4 dozens of cookies
3.44 per piece of Cookies / .3 = 11.47 pesos per cookies
41.24 per dozen of Cookies /.3 = 137.47 per dozen of cookies

Why 30%?

Normally if you are planning to sell, you can't just price 50% is food cost and 50% profit.  There are other expenses that you also need to cover.  Like Utilities (Gas, light water), Transportation, Rent, Labor, Wrappings/ Boxes, the equipment you use which all have to add up.  I would keep my food cost at 30% and at least 30% of my sales will go on utilities, then the 40% will be my profit.  Having a 50% food cost will end up having you losing money in the business.

Other cases, you can just multiply your food cost by 3.  It is a lot easier.  But then, there's little room for adjustments.

Just a bit of a story I encountered recently.  At the end of my Food Costing class, a student of mine came to me crying.  I asked what's wrong.  And she said, "Chef, I feel like my heart is breaking."  I asked, "Why?".  The she replied, "Because I've been baking for 5 years and been selling my cakes so cheap.  Now that I see how much it should cost, I am heartbroken.  Because I have not been making any profit from it.  No wonder my husband kept asking me why I don't have any money."

I saw the cakes that she makes for her clients and they look incredible.  I want to cry as well.

Doing proper food costing should prevent you from getting a heartbreak.  Some people might ask me, why is my product so expensive.  I'm not saying that I'm putting too much "patong" but rather I count all my expenses and my labor in it and by using basic math, I know I am pricing it right.

Some might ask, "But I will lose clients when I increase my prices?".  It might happen, but true customers will support your business.  True friends will buy from your business without asking for discount.  Business is still business.  Asking for "tawad" is bad form.

I've seen recent post about asking how much a cake or their product should cost.  To be honest, I won't even give you a figure on how much it should sell.  Price it out according to your food cost.  Learning to do your own food cost will help create a profitable business for you.