COGS (Cost of Goods Sold): what it is and how to calculate
COGS (Cost of Goods Sold) is how much a restaurant spent on the ingredients for the dishes it sold in a period; it is the same idea as food cost and usually runs 28%–35% of revenue.
How to calculate COGS
The formula is: COGS = beginning inventory + purchases − ending inventory. For the percentage, divide COGS by revenue. Example: $100,000 in revenue and $32,000 in COGS is a 32% COGS.
- COGS value = beginning inventory + purchases − ending inventory
- COGS % = COGS ÷ revenue × 100
- Healthy range: 28%–35% (varies by segment)
How to lower COGS
Standardized recipes, portion control, waste reduction and supplier negotiation all drive COGS down. A system with inventory and recipe costing tells you each dish's cost before it hits the menu.
FAQ
Are COGS and food cost the same?
In practice, yes. COGS is the aggregate cost of goods sold; food cost is usually measured per dish. Same logic.
What is a good restaurant COGS?
It depends on the segment, but 28%–35% is a healthy range. Bars and pizzerias tend to run lower; steakhouses higher.
How do I control COGS day to day?
With recipe costing for each dish, periodic inventory counts and a system that ties sales to stock in real time.