Food cost percentage is the share of your sales that you spend on ingredients. The food cost percentage formula is simple: food cost ÷ net sales × 100. If a cappuccino costs you SAR 3 in ingredients and sells for SAR 15 before VAT, its food cost percentage is 20%.
I built MenuCost, a food costing software for GCC cafés and restaurants, because I saw many owners guess this number. In this guide, I show you how to calculate food cost percentage for one item, for your whole café, and in Excel. I also explain what a good number looks like.
What is food cost percentage?
Food cost percentage tells you how much of every riyal you earn goes to ingredients. A café with a 30% food cost spends SAR 30 on ingredients for every SAR 100 of net sales.
The other SAR 70 must pay for staff, rent, utilities, packaging and your profit. So when food cost rises, everything else gets squeezed.
There are two versions of the number, and you need both:
Item food cost percentage. This is the cost of one dish or drink compared with its price. It comes from your recipe.
Overall food cost percentage. This is what your café actually spent on food in a month compared with what it sold. It comes from your purchases and stock counts.
The food cost percentage formula
Here is the food cost formula for a single menu item:
Item food cost % = (ingredient cost per portion ÷ net selling price) × 100
Here is the formula for your whole café over a period:
Overall food cost % = (opening stock + purchases − closing stock) ÷ net food sales × 100
In Saudi Arabia, net means the price after removing 15% VAT. Your menu price includes VAT, but that VAT belongs to ZATCA. To find the net price, divide the menu price by 1.15.
How to calculate food cost percentage for one item
Let me cost a cappuccino and a butter croissant. The prices below are examples only. Use your own supplier invoices.
Step 1: Cost each ingredient
Take the purchase price and divide it by the quantity in the unit you use in the recipe:
Coffee beans: SAR 110 per kg = SAR 0.11 per gram. 18 g = SAR 1.98
Fresh milk: SAR 6.50 per litre = SAR 0.0065 per ml. 180 ml = SAR 1.17
Sugar sachet and cocoa dusting: SAR 0.10
The cappuccino ingredient cost is SAR 3.25.
Step 2: Add a wastage allowance
Milk is steamed and some is thrown away. Coffee is purged from the grinder. Add a small allowance, for example 5% on milk and 3% on coffee. The cost becomes about SAR 3.37.
Step 3: Find the net selling price
The cappuccino sells for SAR 17 including VAT. The net price is 17 ÷ 1.15 = SAR 14.78.
Step 4: Divide and multiply by 100
3.37 ÷ 14.78 × 100 = 22.8%. That is a healthy number for a hot drink.
Now the croissant. You buy it frozen at SAR 4.20 each and bake it in-house. It sells for SAR 9 including VAT, or SAR 7.83 net. The food cost percentage is 4.20 ÷ 7.83 × 100 = 53.6%. That is very high.
This is why item-level costing matters. Your café average may look fine while some items lose money.
Item | Ingredient cost (SAR) | Net price (SAR) | Food cost % |
Cappuccino | 3.37 | 14.78 | 22.8% |
Butter croissant | 4.20 | 7.83 | 53.6% |
Iced Spanish latte | 4.17 | 15.65 | 26.6% |
How to calculate your overall café food cost percentage
The item formula shows what each sale should cost. The overall formula shows what you really spent. Here is a monthly example:
Opening stock on 1 March: SAR 8,000
Purchases in March: SAR 26,000
Closing stock on 31 March: SAR 9,000
Food and drink sales in March, excluding VAT: SAR 95,000
Food cost = 8,000 + 26,000 − 9,000 = SAR 25,000. Food cost percentage = 25,000 ÷ 95,000 × 100 = 26.3%.
If your recipes say you should be at 23% and your actual number is 26.3%, the gap is waste, over-portioning, staff meals or theft. That gap is where you look first.
Food cost percentage formula in Excel
Many owners start with a spreadsheet. If ingredient cost is in cell B2 and the VAT-inclusive menu price is in C2, use this formula:
=B2/(C2/1.15)
Format the cell as a percentage. For the overall number, put opening stock in B2, purchases in C2, closing stock in D2 and net sales in E2:
=(B2+C2-D2)/E2
Excel works well for a small menu. It becomes hard when you have 60 items and supplier prices change every month. Each price change means editing every recipe that uses that ingredient.
What is a good food cost percentage for a café?
Many restaurants target a food cost between 28% and 35% (Gordon Food Service). Cafés often run lower because coffee drinks have a low ingredient cost. Bakery items, fresh juices and food plates usually run higher.
Do not chase one number for the whole menu. Set a target for each category, such as hot drinks, cold drinks, bakery and food. Then compare each item with its own category target.
Five ways to lower your food cost percentage
Recost every recipe when a supplier changes a price.
Standardise portions with scales, measured pumps and fixed cup sizes.
Review items above 40% food cost and reprice, reformulate or remove them.
Track wastage for milk, bakery and fresh produce every week.
Remove VAT before you calculate any percentage.
Food cost is only one part of the true cost
A low food cost does not always mean a profitable item. A drink with 22% food cost can still lose money if it takes three minutes of barista time and comes in an expensive cup. That is why I measure the True Cost of every item: Ingredients, Labor, Packaging and Overhead together. You can read the full method in how to calculate the true cost of a single menu item.
Your food cost percentage checklist
Write a recipe card with exact quantities for every item
Convert purchase prices into price per gram, ml or piece
Add a wastage allowance for fresh ingredients
Divide by the net price, not the VAT-inclusive price
Set a target food cost for each menu category
Compare recipe food cost with actual monthly food cost
Calculate food cost automatically with MenuCost
MenuCost stores your Ingredients with price per usage unit, builds each Recipe, and shows the food cost percentage and True Cost of every Menu Item. When an ingredient price changes, every recipe that uses it updates.
Start your 7-day free trial at menucost. No credit card required.
Frequently asked questions
What is the formula for food cost percentage?
Food cost percentage = food cost ÷ net sales × 100. For one item, use the recipe cost and the net selling price.
Should food cost percentage include VAT?
No. Divide by the price after removing 15% VAT. Including VAT makes your food cost look lower than it is.
What is a good food cost percentage for a coffee shop?
Many operators target 28% to 35% across the business. Coffee drinks are often lower, while bakery and food items are often higher.
How often should I calculate food cost percentage?
Check item costs whenever a supplier price changes. Calculate your overall food cost every month.
Conclusion
Food cost percentage is the first number every café owner should know. Calculate it for each item, compare it with your actual monthly cost, and always remove VAT first. Then go one step further and find the True Cost of each item.