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The Importance of Basic Costing for Restaurants



Like any other business, the goal of every restaurant is to turn a profit at the end of the day. In order to understand how to make a profit, you must first understand what makes up the cost. By looking at the various costs involved in the operation of the restaurant and by understanding them you can make your restaurant a success. You need to understand these before you start looking for applications that will help you control your costs.


Recipe Costs

Food Costs

Labor Costs

Overhead Costs
The amount you spend on a recipe and how much it costs to serve a portion of that recipe. Recipe cost contributes to your overall food cost.The cost of all the edible ingredients that go into the food you serve to your diners. This is the sum total of your recipe costs and is important for keeping track of your profitability.Costs that includes salaries, benefits, and bonuses you pay your employees.Everything else that falls outside of food costs and labor, e.g. building rent, equipment, taxes, utilities, etc.
Profit vs. Costs
To calculate your profit you would take your total sales for a period and subtract all of your food, labor and overhead costs.


Understanding the Numbers

The key to a profitable business is managing your costs to ensure you have a healthy profit. There are tools to help you identify early in the process if you have food or labor cost issues. The sooner you are aware of these issues, the sooner you will be able to correct the problems and add to your profits.

  • The target for recipe costs should be in the 30% to 45% range of your selling price
  • Make sure your employees are following the recipes
  • Avoid overstocking or overproducing inventory
  • Make use of seasonal ingredients
  • Stretch the use of each Ingredient


The goal of any business is to make money. Keeping track of the costs involved with running your restaurant whether it’s food, labor, or overhead costs, will help you stay competitive and profitable.

Need tools to make your restaurant more profitable? Learn about PeachWorks's full feature Recipe App with built in costing and USDA nutritional reporting.


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