The Importance of Basic Costing for Restaurants

Like any other business, the goal of every restaurant is to turn a profit at the end of the day. But before you can understand how to make a profit, you need to take a step back and understand what makes up your restaurant’s costs. By analyzing the various costs involved in operating a restaurant, you can better understand how to navigate those costs and keep your restaurant on the path to profit and success. Implementing applications that will help control costs is a no brainer for restaurant operators—but before you take the plunge and invest in software, you need to understand the different types of restaurant costs and how they affect your bottom line.

Recipe Costs

The amount you spend on a recipe and how much it costs to serve a portion of that recipe. Recipe cost contributes to your overall food cost. 

Food Costs

The cost of all the edible ingredients that go into the food you serve to your diners. This is the sum total of your recipe costs and is important for keeping track of your profitability.

Labor Costs

Costs that include salaries, benefits, and bonuses you pay to your employees.

Overhead Costs

Everything else that falls outside of food costs and labor, e.g. building rent, equipment, taxes, utilities, etc.


Profit vs. Costs

To calculate your profit, you would take your total sales for a period and subtract all of your food, labor, and overhead cost.

Understanding the Numbers

The key to a profitable business is managing your costs to ensure you have a healthy profit. There are tools to help you identify early in the process if you have food or labor cost issues. The sooner you are aware of these issues, the sooner you will be able to correct the problems and add to your profits.

  • The target for recipe costs should be in the 30% to 45% range of your selling price
  • Make sure your employees are following the recipes
  • Avoid overstocking or overproducing inventory
  • Make use of seasonal ingredients
  • Stretch the use of each ingredient

The goal of any business is to make money. Keeping track of the costs involved with running your restaurant whether it’s food, labor, or overhead costs, will help you stay competitive and profitable.
Ready to invest in tools that make your restaurant more profitable? Learn about Beyond’s suite of restaurant management tools, like Schedule and Inventory Management.

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