How to calculate food cost
Examples are illustrative arithmetic, not benchmarks.
| Measure | Formula | Example |
|---|---|---|
| Food cost % (period) | (Opening inventory + purchases − closing inventory) ÷ food sales | ($4,000 + $11,000 − $3,500) ÷ $34,000 = 33.8% |
| Plate (recipe) cost | Sum of each ingredient’s cost per portion | Burger: bun $0.60 + patty $2.40 + toppings $0.90 + fries $0.70 = $4.60 |
| Plate food cost % | Plate cost ÷ menu price | $4.60 ÷ $17 = 27.1% |
| Price from target % | Plate cost ÷ target % | $4.60 ÷ 0.30 = $15.33 |
| Labour cost % | Wages + benefits ÷ sales | $10,500 ÷ $34,000 = 30.9% |
| Prime cost % | (Food cost + labour) ÷ sales | 64.7% in this example |
Canadian benchmarks (real data)
There is no official “ideal” food cost percentage. Compare against your own type of restaurant and watch the trend month to month.
- In 2024 the food services and drinking places sector had an operating profit margin of 4.1% (3.6% in 2023). Cost of goods sold was 35.9% of expenses, wages and benefits 33.6%, rent 8.1% (Statistics Canada, The Daily: Food services and drinking places, 2024).
- For small and medium businesses (revenue $30,000 to $5 million), average net profit was 2.9% of revenue in 2024. The top quarter earned 9.5% or more; the bottom quarter lost 2.6% or more (ISED, Canadian Industry Statistics: NAICS 722 financial performance (2024)).
- Average rent was 8.3% of revenue, and advertising 1.8% (ISED, Canadian Industry Statistics: NAICS 722 financial performance (2024)). Restaurants Canada’s Operations Report breaks ratios down by restaurant type and province (Restaurants Canada, Operations Report).
How to improve your restaurant profit margin
- Cost every recipe and reprice dishes whose plate cost has drifted.
- Count inventory on the same day each week or month so food cost % is comparable.
- Cut or rework dishes that sell little and earn little.
- Schedule labour to your sales by hour.
- Move repeat delivery orders from commission apps to your own ordering page, where the fee is a card fee instead of a 20–30% commission (see the full-cost table).
Recipe costing and food costing software
A spreadsheet works for one location: one tab of ingredient prices, one per recipe. Inventory or recipe costing software is worth it once supplier prices change weekly or you run several menus. See restaurant software in Canada.
Where Chefzi fits
Chefzi is a commission-free online ordering system for Canadian restaurants: your own ordering page in English and French, for a flat $35 a month. A flat monthly fee keeps delivery commissions out of your food and labour maths. If that sounds useful, book a 15-minute demo and we will show you your own menu in it. No pressure if you are just researching.
Sources
Statistics Canada, The Daily: Food services and drinking places, 2024; ISED, Canadian Industry Statistics: NAICS 722 financial performance (2024); Restaurants Canada, Operations Report
Frequently asked questions
How do you calculate food cost percentage?
(Opening inventory + purchases − closing inventory) ÷ food sales for the same period.
What is the average restaurant profit margin in Canada?
4.1% operating margin for the sector in 2024 (Statistics Canada); 2.9% average net profit for small and medium businesses (ISED).
What is a good food cost percentage?
There is no official target. Benchmark against your restaurant type and track your own trend.
Does food cost include labour?
No. Food cost is only what you pay for ingredients. Add labour and you get “prime cost”, the figure many owners watch alongside food cost.
How do you calculate food cost for a recipe?
Add up the cost of each ingredient in one portion (price per unit × quantity used, with trim waste), then divide by the menu price. A dish with $4.20 of ingredients sold at $16 has a food cost of 26%.