Restaurant COGS: What Counts, the Formula & a Good Percentage

COGS = Beginning Inventory + Purchases - Ending Inventory

That's cost of goods sold: everything your restaurant actually spent on food, beverage, and the packaging that leaves with them, over a period. Divide it by sales and most restaurants should land between 28% and 35%. Simple formula. The arguments start when people disagree about what goes into it.

A chef on r/Chefit described the problem: his bonus depended on hitting a 33% food cost. His spreadsheet said 31%, with every recipe costed and prices current. Then the accountant came back with a COGS near 40%, and the bonus was gone. Both numbers were right. They just answer different questions, and if you run a restaurant you need to know which question each one answers.

What is COGS in a restaurant?

COGS measures consumed inventory: what you used up to generate the period's sales. Not what you bought, what you used. That's why the formula runs through inventory counts instead of just adding up invoices. If you stocked up heavily in March, your March purchases are high but some of that product sells in April. The inventory counts at each end correct for that.

And as a percentage of sales, the number you benchmark against:

Because COGS comes from real counts, it captures everything that happened to your inventory: the dishes you sold, but also the waste, the spoiled produce, the over-portioned proteins, and the case of wine that walked out the back door. That makes it the honest number on your P&L.

A worked example

A full-service casual restaurant doing $86,000 in May sales counts inventory on the morning of May 1 and again June 1:

• Beginning inventory (May 1): $13,600
• Purchases during May: $27,800
• Ending inventory (June 1): $13,200

At 32.8%, this restaurant looks healthy. Hold that thought, because we'll split this same example into food and beverage below and find a problem the blended number is hiding.

Want to run your own numbers? Our free COGS calculator does this math from your inventory counts.

What counts in COGS (and what doesn't)

This is where most of the confusion lives. Some articles even claim restaurant COGS includes labor. For restaurant accounting it does not. The rule of thumb: if a customer consumes it or carries it out the door, it belongs in COGS.

That last row matters more than it looks. A kitchen feeding six staff a shift meal every day can bury $800-1,200 a month in COGS. There's nothing wrong with feeding your team. There's a lot wrong with not knowing it's in the number when you're trying to figure out why COGS came in two points high.

COGS vs food cost percentage

Back to the chef who lost his bonus. His 31% was theoretical food cost: what the menu should cost based on recipe cards, current ingredient prices, and perfect portioning. The accountant's 40% was COGS: what the restaurant actually consumed, measured by inventory counts. One lives on the recipe card, the other in the bank account.

As one commenter in that thread put it: imagine garnishing a martini with a $5 bill but only accounting for the cost of the vodka.

The 9-point gap between his two numbers is where the money went: prep waste, spoilage, over-portioning, staff meals, untracked comps, and possibly theft. Neither number alone can tell you that. You need the theoretical number from costed recipes and the actual number from inventory counts, and the gap between them is your to-do list. Our food cost percentage guide walks through the ideal-vs-actual math in detail.

The hard part is keeping the theoretical side current. Recipe costs drift every time an invoice price changes, and a 31% that was true in January is fiction by June. DishCost keeps that side live: update an ingredient price and every recipe using it recalculates, so when you compare recipe cost to COGS, the gap you see is real waste, not stale data.

What should COGS be for a restaurant?

For most restaurants, 28-35% of sales. You'll see advice ranging anywhere from 20% to 40%, which is true and useless at the same time. The real answer depends on what you sell:

A high COGS is not automatically a problem. A steakhouse at 38% with strong check averages can out-earn a fast casual at 26%. What matters is whether your number fits your concept and where the rest of the P&L lands. COGS plus labor is your prime cost, which should stay under 60-65% of sales. Our prime cost guide covers that math, and the profit margins guide shows the full P&L picture.

Split food and beverage COGS

Now back to our worked example, because the 32.8% was hiding something. Of the $86,000 in sales, $70,000 was food and $16,000 was beverage. Split the inventory counts the same way:

The beverage program is doing great at 21.3%. The kitchen is running 35.4%, at the top of the range for full service, and the healthy bar numbers were dragging the blend down to a respectable-looking 32.8%. One blended COGS can't tell you which side of the house is leaking. Two minutes of splitting the counts can.

Keep the number honest before trying to lower it

A COGS built on sloppy counts will send you chasing problems you don't have. Four habits keep it trustworthy:

Count weekly, at the same time. Sunday close or Monday before deliveries, but pick one and keep it. A count taken before deliveries one week and after the next can swing your COGS by several points all by itself.

Use current prices on the count sheet. Inventory valued at last quarter's invoice prices understates COGS exactly when inflation is eating you.

Pull staff meals and comps out. Log them daily, even roughly. Otherwise they read as kitchen waste and you'll tighten portions when the real answer was a policy decision you already made.

Compare against theoretical cost. COGS tells you money left. Costed recipes tell you how much should have left. The gap is your action list, and our guide on controlling food cost covers how to close it.