How Much Does 1 Serving Cost You? The Stark Truth of Food Cost

Category: 💰 Finance | Reading time: 10-12 min

You sell one portion of Toyuq Sac for 18₼. The food cost comes to 6₼. You say, "I earned 12₼."

You did not earn that.

From that 18₼, rent comes out, employee salaries come out, gas comes out, electricity comes out, broken plates come out, cost of wasted materials comes out, DSMF comes out, taxes come out. In the end, you see that from 18₼, you have 1-2₼ left. Maybe nothing left. Maybe it's negative — but you don't know because you haven't calculated it.

This is the disease of 90% of restaurants in Azerbaijan: they operate without knowing food cost. They set menu prices based on the principle "what did the competitor write, I'll do the same." The result? They lose money on every sale, but they realize it months later — when there's no money left in the till.

What is Food cost? Simplest Explanation

Food cost (ingredient cost) — is the cost of ingredients used to prepare one serving of a dish. Only ingredients. Employee salaries, rent, gas — these are separate. Food cost is only the cost of the material that goes onto the plate.

Formula:

Food Cost % = (Ingredient cost ÷ Sales price) × 100

Example:

• Ingredient cost for Toyuq Sac: 6₼
• Sales price: 18₼
• Food cost: (6 ÷ 18) × 100 = 33.3%

What does this number mean? From every 18₼ sale, 6₼ goes to ingredients. The rest — 12₼ — must cover other costs and leave profit.

What is a "good" food cost percentage?

World standard:

Azerbaijan reality: In Baku, most restaurants operate with a 35-45% food cost. This is very high. Why? Because:

• There is no recipe standardisation (each chef adds as much as they want)
• Portion size is uncontrolled
• Food waste is not calculated
• Seasonal price changes are not monitored
• Purchasing is done from companies without discounts and without comparison

Recipe card — the foundation of everything

Recipe card (recipe costing card) — is the standard recipe for each dish. It contains:

• Quantity of each ingredient (grams, ml, pieces)
• Purchase price of each ingredient
• Trim loss (cleaning loss)
• Total food cost of the finished portion
• Selling price and food cost percentage

Why is it so important?

Without a recipe card:

• Chef A uses 250 grams of chicken, Chef B uses 350 grams — same dish, different cost
• Season changes, tomato price doubles — you keep selling at the same price
• New chef arrives, doesn't know the recipe, works "by eye" — quality and cost vary every day

With a recipe card:

• Every portion is the same — quality is consistent
• Cost is accurate — you know the food cost
• New employee sees the recipe, learns — training speed increases
• When the price changes, you update the card — you immediately see whether the selling price needs to be changed

Practical Example: Chicken Sac Recipe Card

Let's do a real calculation:

Selling price: 16₼ Food cost: (4.79 ÷ 16) × 100 = 29.9%

This is a healthy figure. But let's add trim loss (preparation waste):

What is trim loss? You buy 1 kg of chicken — after cleaning, you have 800-850 g left. That's 15-20% loss. Potatoes are peeled — 10% loss. Peppers are cleaned — 15% loss.

Adjusted total: 5.39₼ (not the previous 4.79₼) Adjusted food cost: 33.7% (not the previous 29.9%)

How to set menu pricing?

"My competitor wrote 16₼, so I'll write 16₼ too" — this is a formula for failure. Because your competitor's costs are different from yours. Their rent may be lower, they may buy ingredients cheaper, they may pay their staff less. If you set the same price, they win, you lose.

The correct formula:

Selling price = Food cost ÷ Target food cost %

Example:

• Food cost (including trim loss): 5.39₼
• Target food cost: 30%
• Selling price: 5.39 ÷ 0.30 = 17.97₼ → round to: 18₼

If your competitor wrote 16₼ and your price based on 30% food cost is 18₼ — do not write 16₼. Either reduce your food cost (cheaper ingredients, smaller portion, optimize the recipe), or sell at 18₼ and create value so the customer is willing to pay.

Food waste — the hidden killer

Every restaurant has food waste. The question is: how much?

World average: restaurants lose 4-10% of the food they buy. In Baku this figure is 10-20%, because:

• Improper storage: Refrigerator temperature is incorrect, food spoils prematurely
• Over-preparation: 50 portions needed tomorrow, the chef prepares for 80 — 30 get thrown away
• FIFO rule unknown: FIFO (First In, First Out) — use older food first. A very simple rule, but in Baku the majority of restaurants put new food on top of old, the old stays at the bottom and spoils
• Lack of portion control: The chef adds "a little more" — each portion uses 10-15% extra material

How to reduce waste?

1. Keep a daily waste log. Every day write down the list of food thrown away: what, how much, why. At the end of the week review it — you will see patterns.

2. Use a prep sheet. Each morning the head chef notes: how much will be prepared today. Based on yesterday's sales and today's reservations.

3. Physically apply FIFO. Label shelves in the refrigerator. New food to the back, old food to the front. This is a 5-minute organization — but it saves hundreds of manats per month.

4. Think cross-utilization. Make broth from leftover chicken bones. Make soup base from trimmed vegetable scraps. Make croutons from stale bread. Turn food that would be thrown away into another dish.

Choosing a Supplier — The "Chef's Man" Trap

This relates to the "owner stuck to the chair" syndrome in our "Hidden Costs" article. I repeat, because 50% of food cost depends on suppliers.

Problem: The head chef buys from a supplier he considers "his man." There is no price comparison. The owner does not know that the same chicken could be bought 10–15% cheaper from another supplier.

Solution:

1. Get prices from at least 3 suppliers. Every month, for every major food item.
2. Have the purchase approved by the owner or the finance person. The chef should not be able to choose a supplier alone.
3. Keep a monthly supplier comparison table. A simple Excel sheet — supplier name, product, price, quality notes.
4. Sign a contract (agreement). Sign a 3–6 month contract for a fixed price — you protect yourself from seasonal spikes.

Seasonal price risk — when should you change the menu?

The price of tomatoes is 2₼/kg in summer and 6₼/kg in winter. That's a 3x difference. If you don't change the price of a dish containing tomatoes, your food cost will increase by 10-15% in winter — from just one ingredient.

Strategy:

1. Implement a seasonal menu. Summer menu, winter menu — update the menu at least 2 times a year.
2. Create a "seasonal dish" section. The menu is fixed, but 4-5 dishes change according to the season — this both optimizes food cost and gives the customer a sense of "novelty".
3. Keep a monthly price tracking table for staple ingredients. Chicken, beef, potatoes, onions, tomatoes, oil — write down the price of 10 main staples every month. See the trend.
4. Add a buffer to the menu price. Instead of targeting a food cost of 30%, target 28% — reserve 2% for seasonal increases.

Procurement Control — "I Check" Instead of "I Believe"

The most effective way to keep food cost low is to systematize the procurement process:

Daily:

• ☐ Check the weight of incoming goods — if the company wrote 10 kg, put it on the scale, is it 10 kg?
• ☐ Check quality — meat color, vegetable freshness, dates
• ☐ Save the invoice (invoice — receipt) and send it to the owner/finance person

Weekly:

• ☐ Stock (warehouse) count — how much is there, how much has been used, how much is lost?
• ☐ Check waste log — are there examples?
• ☐ Check the food cost of the 5 best-selling and 5 least-selling dishes.

Monthly:

• ☐ Compare suppliers — update prices from at least 3 companies
• ☐ Update recipe cards — if prices have changed, recalculate food cost
• ☐ Menu analysis — which dishes are making profit, which are losing?
• ☐ Actual vs Theoretical food cost comparison: theoretically it should be 30%, what is it in reality? If the difference is more than 2% — there is a problem.

Theoretical vs Actual Food Cost — The Most Important Number

Theoretical food cost — the food cost if all recipes are followed perfectly and there is no waste.

Actual food cost — the real calculation at the end of the month:

Actual Food Cost = (Beginning inventory + Purchases during the month - Ending inventory) ÷ Monthly food sales × 100

Example:

• Beginning inventory: 5,000 ₼
• Purchases during the month: 25,000 ₼
• Ending inventory: 4,000 ₼
• Food used: 5,000 + 25,000 - 4,000 = 26,000 ₼
• Monthly food sales: 80,000 ₼
• Actual food cost: 26,000 ÷ 80,000 × 100 = 32.5%

If theoretical food cost is 29%, there is a 3.5% difference. On 80,000 ₼ in sales, that equals 2,800 ₼ monthly loss. Annually 33,600 ₼.

Where does this difference come from? Theft, waste, portion control issues, supplier price inflation, incorrect inventory counts. If you set up the system, you can reduce this difference to 1-1.5%. That means you save 16,000-24,000 ₼ per year.

FOOD COST CHECKLIST — Start Today