Food cost percentage is the share of a dish's selling price that goes on the ingredients to make it. It is the first number anyone looks at when a kitchen is not making money, and it is also the number most often calculated wrongly in Australia — for one specific reason covered below.
The formula
Food cost % = (ingredient cost ÷ ex-GST selling price) × 100
The trap is in the second term. Australian menu prices are quoted GST-inclusive. The GST is not yours — it passes through to the ATO — so it must come out before you divide.
A dish costing $6.40 in ingredients, on the menu at $28:
- Ex-GST price: $28 ÷ 1.1 = $25.45
- Food cost: $6.40 ÷ $25.45 = 25.1%
- Gross profit: $25.45 − $6.40 = $19.05
Divide by the GST-inclusive $28 instead and you get 22.9% — a number that looks two points better than reality. Do that across a whole menu and you will believe you are running at 28% when you are running at 31%, which on a million dollars of food revenue is roughly thirty thousand dollars you thought you had.
You can run the numbers on our food cost calculator, which handles the GST step.
What a good food cost percentage looks like in Australia
These are working bands, not targets:
- Café / counter service: 25–30%
- Casual restaurant: 28–34%
- Pasta and pizza-led venues: 22–28%
- Premium protein or seafood: 34–40%
A steakhouse running 38% is not failing. A pizzeria running 38% has a problem. The band that matters is the one for your format, and even then it is a prompt to investigate rather than a verdict.
Cost the dish properly, or the percentage is fiction
Most food cost calculations are wrong before the formula is applied, because the ingredient cost is taken off the invoice rather than off the plate.
Yield, not purchase weight
You buy a kilo of eggplant. After trimming and salting you have perhaps 800 grams of usable flesh. If you cost the dish on the purchase price per kilo, every eggplant dish on the menu is understated by 20%.
The same applies to every ingredient that loses weight between the delivery door and the plate: fish after filleting, beef after trimming, herbs after picking, anything that reduces in a pan. Weigh the yield once, write it down, and cost from the yielded price.
Everything on the plate
The oil the dish is cooked in. The butter finishing the sauce. The parmesan on top. The bread that comes with it. Salt. None of these feel worth counting individually and together they routinely add two to four points.
The portion your team actually serves
The spec says 90 grams of pasta. If the section is sending 110 because nobody weighs it after the first month, your real food cost is 22% higher than your sheet says. This is the most common single cause of a gap between costed and actual food cost, and it is a training problem rather than a costing one.
The three things that quietly push it up
1. Supplier price drift
You cost the menu in March. By September, four ingredients have moved and nobody re-ran the numbers. Produce moves seasonally and dairy and protein move with input costs. A menu costed once is accurate once.
The practical fix: re-cost the five highest-selling dishes quarterly. Those five drive most of your food spend, and checking five takes an hour rather than a day.
2. Waste nobody logs
Over-prep that gets binned at close. The mistake plate remade. Product that turns because it was ordered for a dish that stopped selling. Staff meals taken out of service stock.
None of this appears in a costing sheet, all of it appears in your invoices, and the gap between the two is your waste. If your costed food cost is 28% and your actual is 34%, that six-point gap is not a mystery — it is waste, portioning, or theft, and it is almost always the first two.
3. A menu weighted towards the wrong dishes
Your overall food cost is a sales-weighted average, not a simple one. If the 38% dish outsells the 24% dish four to one, your blended number follows the 38% dish regardless of what the menu average says.
This is why costing alone is not enough, and why the next step is menu engineering — which asks not what each dish costs, but what each dish contributes given how often it sells.
Why the percentage alone will mislead you
Food cost percentage says nothing about labour, and labour is the other half of your prime cost.
A dish at 22% food cost that takes fifteen minutes of a chef's hands to assemble can easily be less profitable than one at 34% that plates in ninety seconds. The costing sheet approves the first and the roster pays for it.
The number worth watching alongside food cost is prime cost — food plus labour as a share of revenue. Most viable Australian venues sit somewhere around 60–65%. Above 70% and the business is usually not paying its owner properly, whatever the food cost percentage says in isolation.
Common questions
How do you calculate food cost percentage?
Divide the dish's total ingredient cost by the ex-GST selling price and multiply by 100. In Australia menu prices are quoted GST-inclusive, so divide the menu price by 1.1 first — skipping that step flatters the result by roughly two percentage points.
What is a good food cost percentage?
It depends on format. Cafés typically run 25–30%, casual restaurants 28–34%, pasta and pizza-led venues 22–28%, and premium protein or seafood venues 34–40%. A number outside your format's band is a prompt to investigate, not a verdict.
Why is my actual food cost higher than my costed food cost?
The gap is almost always waste and portioning. Over-prep binned at close, remade plates, product that turned, and sections serving heavier portions than the spec. A six-point gap between costed and actual is common and is not a costing error — it is an operations one.
Does food cost percentage include labour?
No. It is ingredients only. Labour is tracked separately, and the two together make up prime cost — the more meaningful number. Most viable Australian venues run a prime cost of roughly 60–65% of revenue.
How often should I recost my menu?
Recost your five highest-selling dishes quarterly. Those drive most of your food spend and checking five takes about an hour. A full menu recost is worth doing annually or whenever you change suppliers.