Target Food Cost

Your target food cost isn’t just another accounting term – it’s the financial compass that guides your restaurant toward profitability. It influences how you price your dishes, what ingredients you buy, and how much profit you can realistically expect from your menu.

Nail it, and you create a sustainable, profit-driven operation. Miss the mark, and even your best-selling dishes can quietly eat away at your bottom line.

What Is Target Food Cost?

At its core, the target food cost is the percentage of revenue spent on ingredients. It tells you how much you should be spending to keep your restaurant financially healthy.

For example, if you sell a dish for ₹500 and your target food cost is 30%, the ingredients for that dish should cost no more than ₹150. That leaves ₹350 to cover everything else – rent, salaries, utilities, and your profit.

Industry Benchmarks

Target food cost varies by restaurant type:

The more value you deliver through ambiance, experience, or branding, the lower your cost can be relative to price.

How to Calculate It

1. Decide on a selling price

2. Determine ingredient cost

3. Use the formula:
   Target Food Cost % = (Ingredient Cost / Selling Price) x 100

Let’s say your ₹600 burger costs ₹180 to make.
Your food cost is (180/600) x 100 = 30%

That’s within range — but how do you make sure this holds true across your whole menu?

The Real Magic: Setting Smart Targets

Instead of applying a blanket percentage to every dish, smart operators segment their menu:

• Best-sellers can have tighter margins to stay competitive

• High-margin items like pasta or rice-based dishes can offset premium ingredients

• Drinks and desserts often have lower costs, helping balance the overall average

It’s all about strategic trade-offs to protect overall profitability.

Tips to Stay on Target

Menu Engineering: Highlight high-margin dishes and rework or remove poor performers
Portion Control: Standardize recipes and use scales or scoops to avoid over-portioning
Inventory Management: Track usage, reduce waste, and rotate stock efficiently
Supplier Negotiation: Revisit contracts or consider alternative vendors
Dynamic Pricing: Raise prices on high-cost items without compromising perceived value

Pro tip: Review your food costs weekly, not just monthly. Quick course corrections keep you profitable.

Don’t Forget the Bigger Picture

Your food cost target is part of a larger equation. To set realistic goals:

1. Calculate your overheads – rent, licenses, salaries, utilities

2. Add your desired profit margin

3. What remains is your max allowable food cost percentage

Let’s say you want a 10% profit margin, and labor runs at 30%. That means your food cost should hover around 30–35%.

Final Thought

Target food cost isn’t a one-time calculation — it’s a living, breathing benchmark that evolves with your menu, your costs, and your customer expectations.

Use it not just to survive, but to grow confidently, price wisely, and run a restaurant where passion meets profit.