Theoretical and actual food cost: understanding the difference.

For each recipe, multiply ingredient quantities by their reference prices, then calculate the cost per portion. Multiply that cost by portions sold. The sum is the theoretical food cost of sales within the scope.

Use the recipe versions, quantities sold and prices corresponding to the period analysed. Retain these references with the calculation so that a recipe change can be distinguished from a price or sales-mix change.

The calculationTheoretical food cost = sum of (portions sold × food cost per portion)

In a simplified case with no transfers or other movements, valued consumption equals opening inventory plus material receipts during the period, minus closing inventory. This distinguishes materials received from those still available.

Base the calculation on opening and closing inventories and documented receipts. Use amounts excluding tax, a common currency and a consistent valuation method. Check movement dates before interpreting the difference.

The calculationWith no other movements: valued consumption = opening stock + receipts − closing stock

Subtract theoretical food cost from valued consumption over the same period. To compare ratios, divide each amount by the same revenue excluding tax after checking sales coverage. If that revenue is zero or missing, the ratio cannot be interpreted.

Express the difference between ratios in percentage points. The monetary variance does not, by itself, prove waste. Before drawing a conclusion, examine stock movements, non-sales uses and the prices used in both calculations.

Several situations can explain a variance: portions that differ from the recipe, preparation waste, staff meals, complimentary items, price changes or inventory errors. A delivery or transfer recorded in the wrong period also changes the picture.

Group checks by quantity, price, movement and scope. Waste already reflected in inventory changes must not be added to the overall calculation a second time. It helps explain consumption, not double it.

Across a network, use comparable periods, units and valuation methods. Document inter-site transfers and their dates. At location level, transfers in and out must be included; at consolidated level, internal movements cancel out.

Also consider sales mix. Two restaurants selling different recipes can have different ratios without either following its specifications less accurately. Comparing actual consumption with its own theoretical reference preserves this context.

Food cost describes raw materials within the scope studied. It does not include all restaurant expenses. Deducting it from revenue gives a balance after materials, which must not be presented as net profit.

Praedixa connects recipe specifications, portion costs and margin tracking. To analyze a variance, start with the restaurant’s data and definitions.