What is food cost variance?
It's how you tell a kitchen that over-portions from a vendor that raised prices, because on the P&L they look identical.
Food cost variance
Actual vs theoretical food costAvT
Food cost variance is the difference between a restaurant's actual food cost in a period and its theoretical food cost for the same period. Actual food cost comes from inventory counts and purchase invoices; theoretical food cost is every item sold, priced at its recipe cost. The gap between them is product that was paid for but never sold at menu price.
Actual food cost is opening inventory plus purchases minus closing inventory. Theoretical food cost is the POS sales mix multiplied by the costed recipe of each item. Subtract the second from the first and you get the variance, in currency and as points of sales.
A positive variance means the kitchen used more than the menu sold: waste, over-portioning, unrecorded comps and voids, theft, prep that got thrown out, or a recipe that drifted from its card. A negative variance is rarer and usually means under-portioning, a count error or a recipe cost that's stale.
Why it matters
Food cost percentage on its own mixes two stories. If it climbs, you don't know whether produce prices rose or the line is dropping every third portion of fries. Variance separates them. Vendor price moves show up in the theoretical cost, because recipe costs follow invoice prices. Whatever is left over is the kitchen.
For a multi-unit group this is the fair comparison. Two locations with different menus and different vendors can't be compared on food cost percentage. They can be compared on variance, because each one is measured against its own theoretical number.
- 01The variance is only as good as three inputs: current recipe costs, an honest count and a complete sales mix with comps and voids included.
- 02Track it by item, not only in total. A total variance of two points can hide one protein losing eight.
- 03Recipe costs must follow invoice prices, or the variance turns into noise the week a vendor raises prices.
- Sales mixEvery item sold, from the POS.
- Recipes costedEach item at current ingredient prices.
- TheoreticalWhat the sales should have used.
- Count + invoicesOpening, purchases, closing.
- ActualWhat the kitchen really used.
- Variance by itemWhere the gap sits, and how big.
The two columns come from different systems. Getting them onto the same period is most of the work.
01What is an acceptable food cost variance?+
There is no single industry number that fits every concept, and any page that gives you one is guessing about your menu. The useful benchmark is your own: last period's variance for the same location, and the direction it's moving. A variance that narrows week over week is a kitchen getting tighter; one that widens after a menu change usually means a recipe card nobody updated. Start by measuring it at all. Most groups don't.
02Is food cost variance the same as food cost percentage?+
No. Food cost percentage is actual food cost divided by sales, one number for the whole kitchen. Variance compares actual food cost with what the items you sold should have cost at recipe. One tells you how much you spent; the other, how much was avoidable.
03Can food cost variance be negative?+
Yes, and it deserves the same attention as a positive one. Actual below theoretical means the kitchen used less than the recipes say: under-portioning that guests notice, a closing count that missed a shelf, or an ingredient cost on the card that's higher than what you now pay. Either way the number is telling you an input is off.
Some of the systems we have shipped
Related
- What is prime cost in a restaurant? →Food cost and labor together, as one share of sales.
- Why can't multi-unit groups see prime cost in real time? →Where the count cadence limits what 'daily' can mean.
- How to connect Toast to QuickBooks →The sales-side journal the sales mix comes from.
- What is intelligent document processing? →How invoice line items get read without re-keying.
- What is reconciliation? →Tying two records of the same period before comparing them.
- Software for restaurants →What we build around the POS you already run.
- Business process automation →Our service behind invoice capture and recipe-cost updates.
