In a past video post, I’ve talked about the big AH-HA moments, discoveries + breakthroughs that Food biz owners have when they look at their Food Costs as a % of revenue, rather than as a simple dollar amount. 

It’s a small change in HOW you look at your business that can have a BIG impact. 

If that has you wondering...

• Why is my Food Cost PERCENTAGE so important? 

• What Food Cost % should I be aiming for? 

• HOW do I lower my food costs? 

You’re not alone!
Here are the answers to these very common questions.

1. Why is Your Food Cost percentage So important? 

Your Food Cost percentage tells you how much of every revenue dollar gets spent on making and selling your product.  

It should be steady month to month and NOT change based on how much or how little you produce and sell.  

It is a KEY factor in building a financially sustainable and profitable food business. 

2. What Food Cost % Should You Be Aiming for? 

As always, there is no one-size-fits-all answer.  

Finding the Food Cost % that will help you price your products right and create long-term financial sustainability + profitability takes an hour or so to iron out and requires looking at your whole business. I’ll touch on that more on that in a future blog post, BUT here are the basics:

Your Food Cost % + Labor Cost % + Operating Cost % MUST consistently total less than 100% to have a profitable business.  

If it totals 100% or more, even if it only happens some of the time…  You need to set and achieve new, lower cost targets to bring that total down.

What do You need to lower your Food Cost % to, to be profitable or improve profitability?  Start there! 

3. How Do You Lower Your Food Costs? 

The first step is to identify the cause(s) of your high food costs:

• Do you have products that are priced too low?

• Ingredient costs that are too high?

• Is there over-purchasing / inefficient ordering happening in your biz?

Once you’ve identified this, you can get to work fixing it and start seeing financial shifts. 

Remember, your sales are never the cause of high food costs, it’s your job to get and keep your food costs under control.

Not sure what your food cost percentage is? Need some helping understanding the numbers of our business?

Download the free Profitability Roadmap!

About the Author: Sarah Delevan is a Food Business Financial Coach and Consultant with over 7 years of working in the food industry. She received her MBA from Rollins College and In 2017 she founded Sarah Delevan Consulting based in Los Angeles, CA and serving clients across the United States. She is the creator of the Financial Success Formula and the founder of the Profitable Food Business program as well as the host of The Good Food CFO Podcast. To learn more about Sarah and opportunities to grow a more profitable food business Click Here.