Target profit Hourly labor (servers, dishwashers, etc. ) Salaried labor (managers, owners, head chef, etc. ) Utilities (gas, electric, water, wifi, etc. ) Fixed costs (rent, mortgage payments, insurance, etc. ) Fees and licenses (taxes, liquor license, business license, food handling permits, etc. ) Supplies (cleaning supplies, non-food cooking supplies, plates, carryout packaging) Marketing Maintenance

Assess your personal finances: create a monthly household budget including rent/mortgage, vehicles, food, personal insurance, and all other personal considerations. [6] X Trustworthy Source U. S. Small Business Administration U. S. government agency focused on supporting small businesses Go to source Do not sacrifice your personal stability for the sake of your business. Examine the repayment options on your loans. Beyond basic awareness of your interest rates, you should also know if you plan to make minimum payments, or begin paying off the loan as soon as possible. How much of your personal money and business income will be diverted to loan repayment? How much is left over? After taking personal finances and loan repayment into consideration, determine how much money can be invested in the business on a monthly basis. Compare this amount to your operating budget. If you cannot afford to meet it, you should adjust your operating budget instead of stretching your finances. Consider enlisting the help of your accountant or banker to help you figure out how far you can safely stretch your finances.

For example, say you can afford to spend $70,000 per month on your restaurant. You and your manager each draw salaried paychecks of $3,500 per month. Combined, salaried paychecks cost $7,000 a month, or 10% of your budget.

Salaries (10%) + Hourly wages (17%) + Supplies (5%) + Utilities (6%) + Marketing (4%) + Fees and Licenses (3%) + Maintenance (4%) + Fixed Costs (21%) + Target Profit (5%) = 75% In this example, 75% of your maximum budget is devoted to everything but food cost. To calculate your maximum allowable food cost, subtract that amount from 100%. 100% - 75% = 25% If your monthly budget is $70,000, you can afford to spend up to $70,000 x 0. 25 = $17,500 on food cost to reach the 5% profit ($70,000 x 0. 05 = $3,500) every month.

Always take inventory outside of business hours, so no food is being delivered or being cooked.

Add up all the sums to determine your opening inventory — the dollar amount for the food in your kitchen at the beginning of the fiscal week.

To calculate actual food cost, complete the following equation: Food Cost % = (Beginning Inventory + Purchases – Ending Inventory) ÷ Food Sales. For our example, let’s say Beginning Inventory = $10,000; Purchases = $2,000; Ending Inventory = $10,500; Food Sales = $5,000 (10,000 + 2,000 – 10,500) ÷ 5,000 = 0. 30 = 30%

Adjust your purchasing every week to keep your inventory in check. You want to bring down your actual food cost to a percentage at or below your maximum allowable food cost. Keep in mind that this calculation can go wrong if you counted items incorrectly during inventory, counted and input units differently than the inventory pricing (such as by counting 10 cans of tomatoes, but being charged by the case for that item), are missing the invoice for a product you counted in the inventory, or having an invoice processed for a product that you do not have (such as a returned item).

Multiply the food cost for each item by how many portions of that item is sold every week. Add all of those sums together to find your total cost. For our example, let’s say you have a total cost of $3,000. That’s how much money you spent to make the food that went out of your kitchen this week. Make sure that all of your items are carefully portion controlled. This will help to ensure that every chef serves the same meal at the same cost.

In our example, let’s say you took in $8,000 in total sales for the week.

You might increase every item on your menu in price by a small amount — maybe 25 cents if your items are fairly inexpensive, maybe $2-3 if they cost a little bit more. Look at your sales figures to see which menu items are most popular with your clientele. You can raise the price on popular items a little more than your less popular items — people will likely be willing to pay for it. Consider getting rid of dishes that don’t sell very well. They don’t have much earning potential. Continually reassess your menu to make sure you’re moving all of the product in your inventory.