Restaurant Management Tip - How to Calculate Restaurant Cost of Goods Sold

Have you ever wondered what the actual cost of goods sold calculation is for your restaurant? It may be the most important calculation you make in your restaurant. Watch this video to learn why this is true and what the basic cost of goods sold formula is for restaurants.
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About David Scott Peters: a restaurant management expert and founder of TheRestaurantExpert.com. He offers independent restaurant owners restaurant management tips, coaching and a software that will revolutionize their business operations and their profits.
About that cost of goods sold calculation ...
Knowing your cost of goods sold could be the one of the most important things you measure in your business. To do it correctly, you have to have the right numbers and the right equation.
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These videos cover ways to take action in the restaurant today to be more efficient and profitable. Whether you’re looking for ways to cut and control food costs, trying to stabilize your labor costs, or you’re interested in building a management team that actually manages, these tips will help you.
David teaches real solutions to the biggest - and smallest - challenges in independent restaurants. Watch this video and then take action!
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Video Notes on How to Calculate Restaurant Cost of Goods Sold:
So what is the right equation? How do you do it?
Start with your beginning inventory - what was on the shelves the last time you counted. You should be taking inventory weekly - monthly at the minimum. (Only the food and liquor.)
Add to your beginning inventory your purchases. Earn, owe, use - accrual accounting.
This gives you a total - how much you have on your shelves that you could sell.
At the end of the period you're measuring - preferably one week - you take an ending inventory. This gives you your product used.
What is used? Sold, waste/spoilage, theft and comps.
Use is blind - where it has gone has to be measured. To do this, divide your produce used by sales to get your cost of goods sold percentage. This is your food cost and/or pour/liquor cost.
If you come up with a 30% food cost, that means for every dollar in food sales that came in, I used 30 cents in product to bring that dollar into the business.
Restaurant cost of goods sold is a vital part of your business, piece of information you must know, to control your bottom line.
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[@faithlynmorrison7368]

I needed help understanding this lesson in my accounting principles course and this video broke everything down for me. THANK YOU. THANK YOU. THANK YOU. I finally understand what's going on.

[@sakaraiakuinikoro2432]

hey, the video is an eye opener thanks..

[@michaelchen7144]

2:05 what is an Earn O U?

[@casesus6096]

Thank you

[@teenanguyen217]

awesome stuff, but I am still a little confused and unsure. It would have been helpful if you have values from a example case to put in to give us a real world realisation of this equation.

[@moniquekennedy560]

Your amazing..thanks for sharing

[@tekenieconomicdevnativebus7444]

Great info.

[@PGActivision]

Very educative and impactful one sir, would like you to take on PNL

[@shamidashing8451]

Please solved throught 1 example

[@CamerieriZeppoleMix]

great job! very specific and usable actionable content

[@mattewesu9086]

A big thank you for the lesson.. please can you help me understand 'how to interpret COGS?

[@MrVibesGod]

Hey Dave, love your videos. I'm struggling to understand the difference between COGS and food/beverage cost. Would you be so kind to break it down for me? Thanks a lot

[@MrVibesGod]

TheRestaurantExpert Wow, that was super useful and easily understandable with your clear explanations, thanks a lot !

[@suzy9594]

Is there a video to specifically understand where consumables are to be put like cocktail nspkins, dishwasher chemicals etc. My group is dumping it into cogs, I don't think that makes sense but they say "it's all part of the cost of doing business "

[@GabiamHaki]

Hi pls more on fuel

[@Alrevanmedia]

Can you tell us the percentages for COGS Cost of labor supplies And the percentage of the profits I should have

[@RestaurantSystemsPro]

They vary by restaurant. We are happy to do budgets for you in one of trainings. Let us know if you want an invite.

[@ak-ir7iu]

how set to set budget for restaurant for 200 pax....also financial modelling of hotels and restaurant also and how how to make pnl for restaurants and perpetual inventory sytem for bars in excel sheet

[@michaeltritsch9565]

Trying to figure out how to add my end of the month inventory to my food cost

[@steakemuppnb952]

hey man, you'll actually subtract it. You haven't used it! So take beginning of the month inventory, add in all the purchases, and then subtract the end of the month inventory, and you have now found all the product that you have used for the month. The ending inventory is the first part of the equation for the next month. It just repeats, its not like you are forgetting to count it. Ending inventory of April becomes Beginning inventory for May. Make sense?

[@efraimbungsu1468]

could you make how to count selling price please

[@sheilawebb9746]

Is your 30% COGS accounting for the waste, spoilage, ect as well, or just the cost of the actual food sold? It seemed like you were saying it did include all that. I forgot where i heard it recently, but that spillage & spoilage should be counted separately from COGS. Is that true, or does it matter? My accountant is having me count them together, & i just want to make sure it doesn't look fishy to the IRS when i include all that. (I'm not in the restaurant industry, but I make things from scratch, so the inventory concepts are very similar.)

[@RestaurantSystemsPro]

Hi Sheila, the cogs does account for waste. Even though you didnt sell it, it still goes against your FC%. Let us know if you have any further questions. Thanks :)

[@tanveerahamed6065]

We want complete profit and loss sheet with examples

[@davidpittman106]

Oh, and thanks in advance!

[@Marce169]

How to control food inventory, like meat?

[@ihetuhare]

what should food costs be? like a good percentage. And thanks for the informative video!

[@greggsourbeck2433]

Harlan, I am the Solutions Coach for TheRestaurantExpert.com. There are number of things to know before anyone should answer what your food cost should be. It starts with a budget: Cost of Goods, Labor, rent, debt service and more. Restaurants in areas like Seattle or New York where minimum wages are much higher than the federal requirement generally must run lower food costs in order to survive. That is why prime cost is so helpful. Check out the videos on this channel that walk through the concepts of prime cost. If you have questions, you can reach me at [phone] ext. 106

[@anthonykitchenculture8217]

Do you take inventory of the stuff that is in your walk in from the week before?

[@davidpittman106]

Dumb question, does the cogs beginning inventory count what's portioned out? Like let's say I purchased a case of french fries that come in 4 separate bags in the case. I then weigh and portion out the fries. How do I account for that? I mean how do I account for the portioned fries out of each individual bag? How far do I break it down?? HELP!!

[@davidpittman106]

Hey, thank you so much for commenting back so fast. Do you mind if I ask you a couple follow up questions in email?

[@esanolugbenga3641]

This is very educative and interactive. Just would like to know how do you determine your sales figure before coming up with cost of the good sold or do you just assume sales price? by just marking up certain percentage?

[@ntombetembanomnganga5586]

Kfc food gap

[@alvinmughal6121]

Labor cost ?? Explanation