Control, 6 min read
Calculate true food cost
Most food-cost numbers are flattering because they are divided by a price that still has VAT in it. Here is the arithmetic, done properly, on one plate of momo.
Food cost percentage is the share of a dish’s selling price that goes on ingredients. It is the first number a chef, an owner and a lender all ask for, and it is usually wrong in the same direction: too low.
There are three common reasons. The price used is the menu price, which in Nepal must include VAT (and service charge, where one is charged). The recipe is written for the ideal plate, not the one that actually leaves the pass. And ingredient costs are last year’s, not what the supplier invoiced this week.
Step 1: cost the recipe, by weight
Write the recipe for one portion, in the unit you actually weigh on the line. Cost each line at the price you last paid, converted into the same unit. Include the things nobody counts: frying oil, the achar, the garnish, the takeaway box.
| Ingredient | Qty | Unit cost | Line cost |
|---|---|---|---|
| Chicken mince | 200 g | NPR 600 / kg | NPR 120.00 |
| Maida (flour) | 100 g | NPR 80 / kg | NPR 8.00 |
| Onion, garlic, ginger, coriander | 70 g | — | NPR 10.00 |
| Oil, salt, spice | — | — | NPR 6.00 |
| Tomato-sesame achar | 60 g | — | NPR 14.00 |
| Plate cost | NPR 158.00 |
Step 2: take tax out of the price
Say the menu price is NPR 480, VAT-inclusive. The restaurant does not keep NPR 480; it keeps the net price and passes the VAT to IRD. At 13% VAT the net price is 480 ÷ 1.13 = NPR 424.78. If your menu price also includes a service charge, strip that out too before dividing. It is not revenue from the dish.
| Divided by | Price | Food cost % |
|---|---|---|
| Menu price (includes VAT) | NPR 480.00 | 32.9% |
| Net price (VAT removed) | NPR 424.78 | 37.2% |
Four points of food cost is the difference between a dish that pays its way and one that quietly does not. Multiply it across a menu and a month and it is rent.
Step 3: allow for yield and waste
Torn wrappers, the first steamer basket that sticks, the plate returned because it went to the wrong table. Measure it for a week (weigh the mince in, count the plates out) and either adjust the recipe quantity or log it as waste so it shows up in the P&L rather than disappearing.
Step 4: keep it current
Chicken, cooking oil and dairy move month to month. A food cost you worked out in spring is a guess by monsoon. The only durable answer is to cost recipes from the price on the latest delivery.