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

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

You didn't make anything.

Out of that 18₼ comes rent, employee salaries, gas, electricity, broken plates, the cost of discarded materials, DSMF, taxes. In the end, you look and see that out of 18₼, you have 1-2₼ left in your hand. Maybe nothing at all. Maybe it's negative — but you don't know, because you haven't calculated it.

This is the disease of many restaurants in Azerbaijan: they operate without knowing their food cost. They set menu prices on the principle of "whatever the competitor wrote, I'll write 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.

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What is food cost? The simplest explanation

Food cost — is the food expense spent on preparing one portion of a dish. Only food. Employee salaries, rent, gas — these are separate. Food cost is only the value of the material that lands on the plate.

Formula:

Food Cost % = (Food expense ÷ Sale price) × 100

Example:

• Food expense for Chicken Sac: 6₼
• Sale price: 18₼
• Food cost: (6 ÷ 18) × 100 = 33.3%

What does this number mean? Out of every 18₼ sale, 6₼ goes to food. The rest — 12₼ — must cover other expenses and provide profit.

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What percentage is a "good" food cost?

The world standard:

Azerbaijan reality: In Baku, many restaurants have a food cost above these ranges. Why? Because:

• There is no recipe standardization (each chef puts in as much as they want)
• Portion size is uncontrolled
• Food loss (waste) is not calculated
• Seasonal price changes are not tracked
• Purchases are made from suppliers without discounts or comparison

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The recipe card — the foundation of everything

The recipe card (recipe costing card) — is the standard recipe of every dish. It contains:

• The quantity of each ingredient (grams, ml, units)
• The purchase price of each ingredient
• Preparation loss (trim loss)
• The total food expense of the finished portion
• The sale price and food cost percentage

Why is this so important?

Without a recipe card:

• Chef A puts 250 grams of chicken, Chef B puts 350 grams — the same dish, a different cost
• The season changes, the price of tomatoes doubles — you keep selling at the same price
• A new chef arrives, doesn't know the recipe, works "by eye" — quality and cost differ every day

With a recipe card:

• Every portion is the same — quality is consistent
• The cost is precise — you know your food cost
• A new employee sees the recipe, learns it — training speed increases
• When a price changes, you update the card — you immediately see whether the sale price needs to change

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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 loss):

What is trim loss? You bought 1 kg of chicken — after cleaning, you're left with 800-850 gr. That means a 15-20% loss. Potato is peeled — 10% loss. Pepper is cleaned — 15% loss.

Adjusted total: 5.43₼ (not the previous 4.79₼) Adjusted food cost: 33.9% (not the previous 29.9%)

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How should you set the menu price?

"The competitor wrote 16₼, so I'll write 16₼ too" — this is a death formula. Because your competitor's costs differ from yours. Their rent may be lower, they may buy ingredients cheaper, they may pay their staff less. If you write 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 up: 18₼

If the competitor wrote 16₼ and your price matching a 30% food cost is 18₼ — don't write 16₼. Either reduce the food cost (cheaper ingredients, smaller portion, optimize the recipe), or sell at 18₼ and create value so the customer pays it.

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Food waste — the hidden killer

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

In many restaurants in Baku, this waste is larger than expected, because:

• Improper storage: The refrigerator temperature is not right, food spoils before its time
• Over-prep: Tomorrow 50 portions are needed, the chef prepares 80 portions — 30 are thrown away
• FIFO rule is unknown: FIFO (First In, First Out) — use the old food first. A very simple rule, but in most restaurants in Baku the newly arrived food is placed on top of the old, the old stays at the bottom and spoils
• Portioning is uncontrolled: The chef adds "a little more" — 10-15% extra material goes into every portion

How can waste be reduced?

1. Keep a daily waste log. Write down the list of food thrown away each day: what, how much, why. Look at it at the end of the week — you will see patterns.

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

3. Apply FIFO physically. Label the shelves in the refrigerator. New food to the back, old to the front. This is 5 minutes of organizing — but it will save hundreds of manats a month.

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

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Supplier selection — the "chef's guy" trap

This is related to the "entrepreneur glued to his chair" syndrome in our "Hidden Costs" article. I repeat it, because a large part of food cost depends on supplier selection.

The problem: The head chef buys from a company that is "his guy." There is no price comparison. The owner does not know that the same chicken could be bought from another company more cheaply.

Solution:

1. Get prices from a minimum of 3 companies. Every month, for every main food item.
2. Purchases must be approved by the owner or the finance person. The chef must not be able to choose a company on his own.
3. Keep a monthly company comparison table. A simple Excel table — company name, product, price, quality note.
4. Sign a contract. Sign a 3-6 month contract for a fixed price — you are protected from seasonal spikes.

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Seasonal price risk — when should you change the menu?

The price of tomatoes is 2₼/kg in summer and 6₼/kg in winter. That is a 3-fold difference. If you don't change the price of a dish that contains tomatoes, your food cost will increase noticeably in winter — from just one ingredient.

Strategy:

1. Implement a seasonal menu. A summer menu, a winter menu — update the menu at least twice a year.
2. Create a "seasonal dish" section. The menu stays fixed, but 4-5 dishes change depending on the season — this both optimizes food cost and gives the customer a feeling of "newness."
3. Keep a monthly price tracking table for staple ingredients. Chicken, beef, potato, onion, tomato, oil — write down the prices of 10 staple ingredients every month. Watch the trend.
4. Put a "buffer" into the menu price. Instead of targeting a food cost of 30%, target 28% — a 2% reserve for seasonal increases.

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Purchasing control — "I trust" instead of "I check"

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

Daily:

• ☐ Check the weight of incoming ingredients — if the company wrote 10 kg, put it on the scale, is it 10 kg?
• ☐ Check the quality — the color of the meat, the freshness of the vegetables, the dates
• ☐ Keep the invoice, send it to the owner/finance person

Weekly:

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

Monthly:

• ☐ Company comparison — refresh prices from at least 3 companies
• ☐ Update the recipe cards — if prices have changed, recalculate the food cost
• ☐ Menu analysis — which dish makes money, which one loses money?
• ☐ 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.

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Theoretical vs Actual Food Cost — the most important number

Theoretical food cost — the food cost that would exist if all recipes were followed perfectly and there were no losses at all.

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 the theoretical food cost is 29%, there is a 3.5% difference. On 80,000₼ in sales, this = 2,800₼ in monthly losses. 33,600₼ per year.

Where does this difference come from? Theft, waste, uncontrolled portions, company price inflation, improperly counted inventory. If you build the system, you can reduce this difference to 1-1.5%. That means you save approximately 19,000-24,000₼ per year.

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FOOD COST CHECKLIST — Start Today

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