Actual vs theoretical food cost: find your gap in a week

Theoretical food cost is what the dishes you sold should have used, worked out from your recipes and your sales counts. Actual food cost is what really left your stock: the opening count, plus what you bought, minus the closing count. The difference is your gap. A one-week count of three to five top dishes shows how big it is and which ingredient it sits in.

The two numbers, in plain words

Theoretical is a number on paper. Take each dish you sold, multiply the sales count by the amount of each ingredient on the recipe card, and add it up. It's what the kitchen would have used if every plate matched its card and nothing was lost, given away or miscounted.

Actual is a number from your shelves. You count your stock at the start of the week, add every invoice for the week, and subtract your count at the end. It's everything that left the shelves, whether it landed on a guest's plate or not. The food cost guide uses the same sum for the month's food cost percentage.

The gap is actual minus theoretical. It's the food your records can't account for. This post is the bridge between two things you may already have: a plate cost for each dish, and a food cost percentage for the month. It lets you compare the two on a few dishes, over seven days, with a pencil. It doesn't repeat how to log waste (see what food waste costs a restaurant) or how to work out the percentage.

A one-week test you can do by hand

Pick three to five dishes that sell the most and the costliest ingredient or two in each. If other dishes on your menu use the same ingredient, count what they use as well, or the gap will include their share.

1. 01Write the recipe for each dish as a weight. How many ounces of each picked ingredient go on one plate, as the line really portions it. Weigh a few plates for this rather than copying an old card. Where the card is in cooked ounces, turn it into raw ounces first (the yield section below shows how).
2. 02Count the picked ingredients at close on the last night of the week before. Count the same shelves in the same order each time, and count open packs by weight. The IRS's small business tax guide describes an inventory form with columns for the item, quantity, unit price and value, and a space for who counted, who priced and who checked the sums. It's written for tax records, but the layout works for a weekly count too.
3. 03Keep every invoice for those ingredients for the seven days, with the weight on each one. Count what was received, not what was ordered.
4. 04Pull the sales counts for the same seven days from your POS item report: how many of each dish were sold.
5. 05Count again at close on the last night of the test week. Same shelves, same order, same units.
6. 06Work out both numbers in pounds first, then price them. Use one invoice price per pound for both, so a price change doesn't blur the result.

A worked week

Here's Maple Street Kitchen, a made-up full-service restaurant. Every name and number here is an example. It tests four dishes that share three ingredients over one week.

Sales of the four dishes come to $7,770 (200 × $14 is $2,800, 80 × $13 is $1,040, 150 × $11 is $1,650, and 120 × $19 is $2,280). The recipes say how much each ingredient should have gone.

The counts and invoices for the same week give the actual use.

The gap isn't spread evenly. Beef is $40.00 of the $73.10, so beef is where to look first. That's why you count by ingredient, not only in total.

Where a gap comes from

The number tells you how much, not why. Most gaps come from a handful of causes, and most of them can be measured one at a time.

Yield: why a price per pound isn't a cost per cooked pound

Raw price per pound is the price of what you bought. A cooked plate holds less than that, because meat loses fat and water, and bones and trim don't go on the plate. The USDA's Food Buying Guide for Child Nutrition Programs lists yields for this. In its meats and meat alternates section, 1 pound as purchased of fresh or frozen ground beef with no more than 20% fat gives 0.74 pound of cooked, drained, lean meat. A whole chicken as purchased gives 0.36 pound of cooked, boned meat without skin, not counting the neck meat and giblets.

Read those as proof that the two weights differ, not as numbers to copy. The guide is written for school meals and other child nutrition programs, not restaurants. On its about page, it describes its figures as average yields from good-quality food prepared with little waste, and says it generally rounds its servings down. Your cut, cooking method and trim will differ, so weigh your own before and after, three times, and use your average.

Portions, comps and counts

Portions. A card that says 6 oz doesn't mean every patty weighs 6 oz. Maple Street weighs ten patties off the line at the Friday rush and they average 6.5 oz. That's half an ounce over on 200 burgers: 100 oz, or 6.25 lb, about $31.25 of the 8.0 lb beef gap. That leaves 1.75 lb ($8.75) of beef still unexplained. One check turned part of the gap into a cause.

Comps and staff meals. Food that leaves the shelves and never rings up still counts as used. A remade plate, a comped dessert, a staff meal or a taste for a new special all count as actual use and not as theoretical use. Unwritten, they're the part of the gap you can't explain. So is food the owner takes home: the IRS's guide says items taken for personal use come out of cost of goods sold, and how your books handle it is a question for your accountant.

Price changes. If the card was costed at last spring's price and the invoice is higher now, theoretical cost in dollars runs low even if every ounce matches. Pricing both numbers at one invoice price takes this out of the weekly gap. Re-cost the cards at today's prices to see it on its own.

Counting and unit errors. Cases against each, pounds against ounces, an open bag counted twice, a delivery counted but not logged. These make gaps that look real. The EPA tells businesses to “compare purchasing inventory with customer ordering”, which is the same comparison from the waste side: what came in against what was sold.

What gap is acceptable? Set your own

We found no official threshold. In the government and trade-association sources we looked at, none publishes an acceptable gap between actual and theoretical food cost, so we don't print anyone's range. A range measured in another kitchen says little about yours. The ranges you'll find online come from software sellers, and they don't agree with each other.

You can find your own range, from your own counts:

1. 01Correct the cards first: weigh yields, re-cost at today's invoice prices, and write each recipe in weights.
2. 02Weigh portions on the line for the picked dishes, and write down waste, comps, remakes and staff meals for the week.
3. 03Run the one-week count for three weeks in a row, on the same ingredients, with the same counting routine.
4. 04Look at the gap left in each of the three weeks. Their spread is a starting range for your kitchen: the gap you get when what you can control is under control.
5. 05After that, a week well above your range is the week to look into. Update the range as you add weeks.

Say Maple Street's three clean weeks leave gaps of 0.4, 0.6 and 0.5 of a point on the four dishes (example figures). Its starting range is 0.4 to 0.6. The first week's 0.9, counted before the cards were corrected, sits above it. A range like this belongs to that kitchen and that menu. It's not a standard for yours.

What to do with the result

• Start with the biggest line. In the example, that's beef at $40.00 of $73.10.
• Change one thing at a time (weigh patties, cost the taco card with its yield, write down staff meals), then run the count again. If you change four things at once, you won't know which one moved the number.
• Count and order to a par. Our free prep list and par sheet gives you a sheet to count against and an amount to order or prep.
• Don't punish the number. If writing down a comp gets someone in trouble, it stops being written down. It doesn't stop happening.

The guide's section on the two quiet leaks behind a high number covers the same ground from the monthly number.

This week

1. 01Pick three to five top-selling dishes and the one or two costly ingredients in each. Write each plate's amount in raw ounces.
2. 02Count those ingredients at close tonight, on an inventory sheet with the item, quantity, unit and who counted. Keep every invoice for them this week.
3. 03In seven days, count again, pull the sales counts for the same seven days, and work out theoretical use, actual use and the gap in pounds.
4. 04Price the gap at one invoice price per pound and write it in dollars and in points of those dishes' sales.
5. 05Take the biggest line, run one check from the table (weigh ten portions, or weigh a yield), change one thing and count the next week the same way.