Your food cost is wrong in two places

Most kitchens have one: a costing sheet, filled in the week the menu was written, with a neat figure at the bottom that says what each plate costs. Then it goes into a drawer, and the menu goes on the wall.

The figure on that sheet is almost always too low. Not because anybody cheated, but because the usual sum leaves out two things every kitchen pays for every single day.

The first is what you throw away before the food ever reaches the plate. The second is money that was never yours in the first place: the VAT sitting inside your menu price.

Here is the sum done properly on one dish, so you can see the size of the gap. Then you can do it on your own menu in an afternoon.

The sum everybody does

Take a dish from Acacia, the example restaurant I use for worked sums: pan-fried salmon, crushed potatoes and green beans, €24 on the menu. The usual costing multiplies the grams on the plate by the price on the invoice.

€3.74 against €24 comes out at 15.6 per cent. Most owners would be pleased with that sheet and stop there. It is wrong in two places.

Leak one: you pay for what you trim

The invoice price is for the product as it arrives. The grams on the plate are what is left after the skin, the bones, the ends, the peel and the pan. Cookery schools call the first the as-purchased weight and the second the edible portion, and the ratio between them is the yield.

You find it by weighing, not by guessing. Weigh a delivery as it comes in, prepare it the way your kitchen actually prepares it, weigh what is usable, and divide the second number by the first.

Usable price per kg = invoice price per kg ÷ yield

At Acacia the chef did exactly that. Trimmed salmon portions came to 82 per cent of what was bought, peeled potatoes to 85 and topped beans to 90. Those are Acacia's numbers. Yours will be different, and that is the whole point of weighing your own.

Then there is everything nobody writes down: the oil in the pan, the salt, the lemon, the herbs. The usual way to cover it is a small fixed percentage on top of the ingredients, known in costing as the Q factor. Acacia uses 5 per cent; set yours by checking what those items really cost you over a month.

One euro a plate that the sheet in the drawer never saw.

Leak two: part of the menu price was never yours

The €24 the guest pays is not €24 of sales. Part of it is VAT, which you collect and hand on. Food cost has to be measured against what actually stays with you, and that is the price without VAT.

The rate depends on where you trade. EU rules allow each member state to put restaurant services on a reduced rate, and the rate differs from country to country. Say yours is 10 per cent:

Price without VAT = €24 ÷ 1.10 = €21.82

Now the honest figure. €4.74 against €21.82 is 21.7 per cent. The drawer said 15.6. That is not a rounding error. It is the difference between a dish that carries the room and a dish that is quietly being carried by it.

If that salmon sells sixty times a week, the euro the sheet missed is €60 a week and €3,120 a year, from one line on one menu.

The number that tells you the truth

Even a properly costed plate is only a promise. It assumes the cook plates 160 grams and not 190, and that nothing goes in the bin on Sunday night. To see whether the promise holds, you put it next to what you actually spent.

Actual food cost = (opening stock + purchases − closing stock) ÷ food sales without VAT

Count the stock at the start and at the end of the same period, add everything you bought in between, and divide by what you sold over that period, without VAT. That is your actual food cost.

Then compare it with the figure your costed menu says you should be running at. The gap between the two is the money that left through portions, waste, breakages and mistakes. Everything above this point is about making the expected figure honest enough to be worth comparing.

It is the same kind of leak as the phone nobody picks up and the delivery commission nobody adds up. Nothing in the daily report shows it, so nobody counts it.

What to do on Monday

• Pick your three best-selling dishes. Not the whole menu; three.
• Weigh one delivery of the main ingredient of each, before and after prep, and write the yield on the costing sheet.
• Take VAT out of the menu price before you work out a single percentage.
• At the end of the month, count the stock, work out the actual food cost and put it next to the costed one.

That is one afternoon and one stock count. If you want the whole method with blank forms, it is laid out in The Code Equation, the second book of the Menu Trilogy.