The cost of goods sold formula is as follows: Beginning Inventory + Purchased Inventory – Ending Inventory = Cost of Goods Sold (COGS)
#REVENUE COGS HOW TO#
How to Calculate Cost of Goods Sold for Your Restaurant What is the Cost of Goods Sold Formula? Perhaps food waste in the kitchen is higher than usual due to several new hires.ĬOGS is most definitely a critical restaurant accounting KPI, but it needs to be a starting off point and not your only metric - much like restaurant inventory turnover ratios, restaurants need more precise insights to accompany COGS measures. Maybe suppliers have increased their prices, and you haven’t adjusted yours.
You can track COGS and COGS ratio over time to identify trends and determine if you’re in control of your costs.įor example, if COGS consistently rise for three months while turnover remains constant, you may have a problem. That being said, a good average COGS number to aim for is usually around 31%. This higher COGS isn’t necessarily alarming because they then charge a premium to more than cover these costs. Fine dining generally has higher COGS because they use better quality, more expensive ingredients. It’s generally a sign of good financial health.ĬOGS typically varies between restaurants depending on factors like size and concept.Ĭonsider a fine dining restaurant vs.
A lower ratio is preferred as it suggests you’re spending less to make more money. The COGS/Sales ratio quantifies your spend relative to revenue. What does COGS say about your restaurant?ĬOGS tells you how much you are spending to make what you’re selling across your restaurant operation - individual locations, shared concepts, or an entire portfolio.
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