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Why Is It Important to Calculate Restaurant Food Costs?

POS Restaurant Software Dubai

When you start a restaurant business or think about it, a lot of things can come to your mind. If the cost of investing in the infrastructure is your main concern before launching the restaurant, then keeping track of your food costs will become your major cause of worry once the business is a few weeks into operation. The good news is that you can effectively manage this with the help of our POS Restaurant Software Dubai. 

 

Knowing how much cost you are putting into sourcing groceries and preparing the dishes is central to any restaurant business. If you have no clue with regard to your restaurant food cost or if you don’t have a Restaurant POS Software Dubai system, you won’t be able to take crucial financial decisions.

 

Every important operation of your restaurant business largely depends on the financial decisions you take. For instance, designing your menu, making timely and profitable changes, drawing an accurate budget plan for your weekly and monthly grocery purchases, or estimating the expenses for the same. You can’t afford to spend more than what you earn, which is why you will need a POS Restaurant Software Dubai. 

 

By switching to a reliable restaurant POS software Dubai for food costing based on a practical food costing formula, you can have a clear understanding of your business’s health. It enables you to distinguish between the dishes that sell well and fetch more revenue vs the dishes that fail to fetch revenue. Over time, you can prioritize the dishes that turn out to be more profitable.

What is Meant by Food Cost?

Food cost is the cost that a restaurant has to incur in order to serve the food items listed on its menu. This would not only include the money spent on procuring the ingredients for the dish but also all the fixed costs such as property rent, labor charges, and electricity costs. You will get the exact food cost per dish when you can ascertain the spending on each of the aforementioned factors. Understanding the correct food cost is essential to determine how much profit margin each of your food items offers you

How to Calculate Food Cost?

Below is the easiest method to determine the food cost. 

  • Sort your dishes based on the ingredients used in their preparation 
  • Figure out the cost of each dish 
  • Find out how much each meal costs you
  • Calculate the difference between your menu price for a meal and the actual cost you suffer for serving it.  
  • Fix an amount as your estimated food cost.

Why is it Important to Calculate the Food Cost?

No one runs a business just for the sake of it or for charity. They do it because they want to make a profit from it. Profit is the core purpose of every business. When you operate a restaurant, you make a profit by way of selling food. How do you know if you are making a profit by doing this or not? The simplest way to calculate your profit is to see the difference between your food cost and your actual earnings. If your food cost is 50000 per day and your earnings from selling it are 75000, your profit is 25000. 

 

Today, majority of the restaurants have systems such as Restaurant POS Software Dubai in place to calculate food costs. It is said that restaurants that keep close track of the food cost manage to maintain their business without seasonal losses. This is because calculating the food costs allows them to avoid making dishes that do not yield any profit. Whether you run a small restaurant or a huge multicuisine restaurant, it is important to calculate food costs. If you have no clear idea of how to do that, then get in touch with the experts at EBR who have designed the POS Restaurant Software Dubai.

Benefits of Determining the Food Cost

We have already seen that knowing the food costs enables the restaurant owner to find out which dish is making more profit and which is making less. With this data, you can take the next big step in your business which is menu optimization.

 

Another great benefit of food cost calculation is that it helps you sense the rising cost of specific ingredients. To continue serving a dish that requires expensive ingredients, you will either need to increase the price for the specific dish or remove it from your menu.

The Profitable Costing Formula for Food

If you do not wish to suffer a loss in your restaurant business, you may have to implement a profitable costing formula for food. Here is what you can do. 

  • Highlight food items that are more profitable to you on the menu
  • Try alternative ingredients to cut rising food cost
  • Hike prices of items if their food cost keeps increasing. 
  • Remove fewer ordered food items from the menu.

Conclusion

In short, having a workable food costing formula is essential to run a restaurant profitably. If you need to know more about this, then it is best to get in touch with the experts who created POS Restaurant Software Dubai