{"id":24532,"date":"2020-08-31T13:30:00","date_gmt":"2020-08-31T13:30:00","guid":{"rendered":"https:\/\/www.posist.com\/restaurant-times\/?p=24532"},"modified":"2023-08-29T17:21:41","modified_gmt":"2023-08-29T11:51:41","slug":"food-cost-formula-saudi-arabia","status":"publish","type":"post","link":"https:\/\/www.posist.com\/restaurant-times\/saudi-arabia\/food-cost-formula-saudi-arabia.html","title":{"rendered":"How Restaurants In Saudi Arabia Can Use Food Cost Formula To Manage Inventory"},"content":{"rendered":"<p><span style=\"font-weight: 400;\">All restaurateurs in Saudi Arabia must calculate their food costs and make <\/span><a href=\"https:\/\/www.Posist.com\/restaurant-times\/resources\/a-definitive-guide-to-menu-pricing-and-calculating-food-costs.html\"><span style=\"font-weight: 400;\">appropriate changes in the menu pricing<\/span><\/a><span style=\"font-weight: 400;\"> to optimize the overall costs and decrease wastage. However, calculating the food cost isn&#8217;t an easy task. Often, most restaurant owners are unaware of how to use the correct food cost formula. In this article, we will explain the importance of food cost formula and how restaurants in Saudi Arabia can calculate food costs using the correct method.\u00a0<\/span><\/p>\n<h2><b>Importance Of Food Cost Formula<\/b><\/h2>\n<p><span style=\"font-weight: 400;\">Food cost is the ratio between the raw material costs incurred in making a dish and the total revenue a restaurant generates.<\/span> <span style=\"font-weight: 400;\">Most of the time, beverage costs are not included and counted separately. In percentage terms, the food cost is primarily a restaurant&#8217;s total food purchase, divided by the total sales.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Calculating the restaurant food costs greatly helps in maintaining a healthy business. However, figuring it with the help of a set of proper food cost formulae can help you achieve better accuracy, and<\/span><a href=\"https:\/\/www.Posist.com\/restaurant-times\/usa\/restaurant-inventory-management-usa-2.html\"><span style=\"font-weight: 400;\"> reduce overall expenses<\/span><\/a><span style=\"font-weight: 400;\">. These are some of the reasons why calculating food costs is essential.<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Food cost determines a<\/span> <span style=\"font-weight: 400;\">restaurant&#8217;s profitability. Without understanding the prices of various items, and their menu costs at different periods, it will be challenging for restaurants to run a highly profitable business. Analyzing the areas that require more adjustments and changes will help you garner more profit.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Lower food cost ultimately generates higher profit and helps you to price your menu items correctly.<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Pricing your menu items accurately will<\/span><a href=\"https:\/\/www.Posist.com\/restaurant-times\/restro-gyaan\/optimize-restaurant-menu.html\"><span style=\"font-weight: 400;\"> help you optimize your menu as required<\/span><\/a><span style=\"font-weight: 400;\">. This is known as menu engineering. Just by adjusting the items in a proper arrangement in the menu, designing the menu correctly, and highlighting the best-selling items can do wonders in increasing your profits to a great extent.\u00a0<\/span><\/li>\n<\/ul>\n<h3><b>The Correct Formula For Calculating Food Costs<\/b><\/h3>\n<p><span style=\"font-weight: 400;\">Before understanding how to calculate the food cost of your restaurant, it is firstly important to understand the two types of food costs;<\/span><\/p>\n<p><img decoding=\"async\" class=\"alignnone wp-image-23395 size-large\" src=\"https:\/\/www.Posist.com\/restaurant-times\/wp-content\/uploads\/2018\/09\/food-cost-calculator-1024x683.jpg\" alt=\"How to manage restaurant finances\" width=\"696\" height=\"464\" srcset=\"https:\/\/www.posist.com\/restaurant-times\/wp-content\/uploads\/2018\/09\/food-cost-calculator-1024x683.jpg 1024w, https:\/\/www.posist.com\/restaurant-times\/wp-content\/uploads\/2018\/09\/food-cost-calculator-300x200.jpg 300w, https:\/\/www.posist.com\/restaurant-times\/wp-content\/uploads\/2018\/09\/food-cost-calculator-768x512.jpg 768w, https:\/\/www.posist.com\/restaurant-times\/wp-content\/uploads\/2018\/09\/food-cost-calculator-1536x1024.jpg 1536w, https:\/\/www.posist.com\/restaurant-times\/wp-content\/uploads\/2018\/09\/food-cost-calculator-2048x1365.jpg 2048w, https:\/\/www.posist.com\/restaurant-times\/wp-content\/uploads\/2018\/09\/food-cost-calculator-696x464.jpg 696w, https:\/\/www.posist.com\/restaurant-times\/wp-content\/uploads\/2018\/09\/food-cost-calculator-1068x712.jpg 1068w, https:\/\/www.posist.com\/restaurant-times\/wp-content\/uploads\/2018\/09\/food-cost-calculator-1920x1280.jpg 1920w, https:\/\/www.posist.com\/restaurant-times\/wp-content\/uploads\/2018\/09\/food-cost-calculator-630x420.jpg 630w\" sizes=\"(max-width: 696px) 100vw, 696px\" \/><\/p>\n<h4><b>Plate Cost<\/b><\/h4>\n<p><span style=\"font-weight: 400;\">Plate cost is the amount you receive after dividing the value incurred while preparing a dish, divided by the selling price of the meal. To find the percentage, multiply this amount with 100.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Every restaurant must understand how much each plate, each item, or each drink costs them. Here&#8217;s the formula for calculating the plate cost:<\/span><\/p>\n<p><b>The cost incurred while preparing a dish\/the final selling price =\u00a0 the plate cost<\/b><\/p>\n<p><span style=\"font-weight: 400;\">For instance, a single falafel costs $2.00 to prepare\/ and the selling price is $8.00 = $0.25 is your food cost.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">The food cost percentage : 0.25 X 100= 25%<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Therefore, the plate cost per falafel is 25%.\u00a0<\/span><\/p>\n<h4><b>Period Cost\u00a0<\/b><\/h4>\n<p><span style=\"font-weight: 400;\">Period cost is slightly complicated, but it is essential for restaurants to keep a tab on this cost as well. Period food cost is essentially the cost incurred on food by a customer, in either a month or a quarter. However, if you want to determine the period food cost, you must know the COGS (Cost of Goods Sold) formula.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Period costs can determine the costs incurred over a period of time for any category in your restaurant.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">The Formula for calculating COGS is:\u00a0<\/span><\/p>\n<p><b>Beginning Inventory + New Inventory Purchased \u2013 Ending Inventory = Total Food Usage in a particular period.\u00a0<\/b><\/p>\n<p><span style=\"font-weight: 400;\">Once you gain the total amount, you can find the Cost Of Goods Sold by this formula :<\/span><\/p>\n<p><b>Total Food Usage\/Total Food Sales = COGS.\u00a0<\/b><\/p>\n<p><span style=\"font-weight: 400;\">To calculate the COGS in percentage terms, multiply it with 100:<\/span><\/p>\n<p><b>COGS X 100= COGS%<\/b><\/p>\n<p><span style=\"font-weight: 400;\">The period cost can<\/span> <span style=\"font-weight: 400;\">determine food cost, beverage costs, and merchandise cost.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">When using the COGS formula to calculate the food cost, ensure that you compare the right categories of inventory to the appropriate category sales. Make sure that you are comparing the right inventory and purchase period to the correct sales period.\u00a0<\/span><\/p>\n<p><img decoding=\"async\" class=\"alignnone wp-image-23394 size-full\" src=\"https:\/\/www.Posist.com\/restaurant-times\/wp-content\/uploads\/2018\/09\/Food-Cost-Formula.gif\" alt=\"\" width=\"800\" height=\"600\" \/><\/p>\n<p><span style=\"font-weight: 400;\">For instance, if you want to calculate the period cost for the month of July, you need to do the following:\u00a0<\/span><\/p>\n<p><b>Food beginning Inventory(for July) + Food purchases(in July) \u2013 Ending Inventory(at the end of the month) = Total food usage for the month of July<\/b><\/p>\n<p><span style=\"font-weight: 400;\">Once you have a particular month&#8217;s food usage, you can apply the COGS formula to understand the cost of the goods.<\/span><\/p>\n<p><b>Food usage in July \/ Food sales in July = COGS<\/b><\/p>\n<p><span style=\"font-weight: 400;\">Multiply it by 100 to get the COGS amount in percentage values.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Once you have the food cost in place, you can bring in all the necessary changes to bolster your restaurant&#8217;s sales. By understanding the most selling and least selling menu items, you <\/span><a href=\"https:\/\/www.Posist.com\/restaurant-times\/restro-gyaan\/restaurant-menu-engineering-tips.html\"><span style=\"font-weight: 400;\">can apply the right menu engineering <\/span><\/a><span style=\"font-weight: 400;\">techniques and replace the least selling items with high-profit margin items. This will also help in reducing the overall operating expenses. <\/span><\/p>\n<p><span style=\"font-weight: 400;\">Follow the food cost formula in Saudi Arabia and apply it appropriately to keep your cash registers overflowing!<\/span><\/p>\n<!-- AddThis Advanced Settings generic via filter on the_content --><!-- AddThis Share Buttons generic via filter on the_content -->","protected":false},"excerpt":{"rendered":"<p>All restaurateurs in Saudi Arabia must calculate their food costs and make appropriate changes in the menu pricing to optimize the overall costs and decrease wastage. However, calculating the food cost isn&#8217;t an easy task. Often, most restaurant owners are unaware of how to use the correct food cost formula. In this article, we will [&hellip;]<!-- AddThis Advanced Settings generic via filter on get_the_excerpt --><!-- AddThis Share Buttons generic via filter on get_the_excerpt --><\/p>\n","protected":false},"author":24,"featured_media":24533,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"content-type":""},"categories":[1161],"tags":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v21.7 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>How Restaurants In Saudi Arabia Can Use Food Cost Formula To Manage Inventory<\/title>\n<meta name=\"description\" content=\"We will explain the importance of food cost formula and how restaurants in Saudi Arabia can calculate food costs using the correct method.\u00a0\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" 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