The Four Faces of Food Cost

Abstract

The concept of food cost cannot be accurately and completely examined from just a single percentage. In order to grasp the total impact of food cost on operating profit one must examine it from four perspectives (faces).

The starting point is the Maximum Allowable Food Cost. Calculated from an operating budget, it determines the highest percentage that will still allow profit objectives to be achieved. The percentage shown on the monthly income statement is the operation's Actual Food Cost percentage. It is in turn compared to the Potential Food Cost, calculated from weighted sales and food cost figures. It is the lowest of the four food costs because it is calculated from only the cost of food sold. Standard Food Cost percentage tempers the Potential Food Cost wilh allo ii.ances for food consufiied but not sold and serves as the realistic food cost goal.

Each of the four faces of food cost must be individually calculated for each operation. There is no universal average that can be used as a standard in any given operation as no two will be identical in all influencing variables.