Food cost percentage: how to calculate it in the UK
Liam Jones
Founder of Pilla
Date Modified
13 October 2026
Date modified: 13th October 2026 | This article has been written by Pilla Founder, Liam Jones, click to email Liam directly, he reads every email.
Food cost percentage is the cost of the food you used divided by your food sales excluding VAT, multiplied by 100. Work it out per dish from the recipe cost, and per week or month from opening stock plus purchases minus closing stock.
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Food cost percentage at a glance
- Food cost percentage = cost of the food you used ÷ your food sales excluding VAT × 100.
- Work it out two ways: per dish, from the recipe cost, and per period, from opening stock + purchases − closing stock.
- In the UK, menu prices must include VAT, so take the VAT out of sales before you divide. If you leave it in, food cost looks lower than it is.
- Food cost percentage and food gross profit percentage add up to 100. A 70% markup is not a 70% margin.
- The best UK survey figure we found is a food gross profit of 67%, which is a 33% food cost. It comes from a 2022 industry report covering late 2021, during a temporary VAT cut. Set your actual target from your own costs.
What is food cost percentage?
Food cost percentage is the share of your food sales that went on the ingredients used to make that food. You divide the cost of the food by the food sales for the same dishes or the same period, then multiply by 100. If £30 of ingredients produced £100 of food sales (excluding VAT), your food cost percentage is 30%.
It answers a narrow question: out of every pound a customer pays for food, after VAT, how much went straight back out on ingredients? It doesn't include wages, rent, energy or packaging unless you choose to count packaging as part of the dish. Food cost plus labour cost together make up prime cost, which is a separate measure.
How do you calculate food cost percentage for a dish?
For one dish, add up the cost of every ingredient in one portion, then divide by the selling price excluding VAT:
Food cost % = portion cost ÷ selling price excluding VAT × 100
The selling price on your menu includes VAT. That isn't a choice: the Price Marking (Food and Drink Services) Order 2003 says an indicated price for food "which is subject to value added tax shall be inclusive of the tax". So strip the VAT out first.
Which rate to strip depends on what you sell. HMRC's VAT Notice 709/1 (updated 8 June 2026) says food and drink for consumption on your premises is always standard-rated, and hot takeaway food is standard-rated. Cold takeaway food is zero-rated, unless it's a type that's always standard-rated, such as crisps and sweets (Food products, VAT Notice 701/14). The standard rate is 20%, so for a standard-rated dish you divide the menu price by 1.2.
Take a £15.00 eat-in dish with a £3.75 portion cost. The net price is £12.50, so the food cost is 30.0%. The £2.50 of VAT belongs to HMRC. Dividing by the VAT-inclusive price shows 25% instead of 30%. That's 5 percentage points, and it understates the real food cost by a sixth (5 ÷ 30 = 16.7%). The gap is the same on every standard-rated dish, so a whole menu costed this way looks better than it is.
If a sandwich is zero-rated as cold takeaway but standard-rated when eaten in, its net price changes with where it's eaten. If you run a café with a lot of takeaway trade, work out food cost on your net sales from the till. Menu prices won't tell you the VAT split.
How do you know if takeaway food is hot?
Notice 709/1 sets the test in section 4.2. Takeaway food is standard-rated "if the food and drink (or any part of it) is hot at the time that it's provided to the customer (the precondition), and one or more of the following 5 tests are satisfied". It must have been:
- "heated for the purposes of enabling it to be consumed hot"
- "heated to order"
- "kept hot after being heated"
- "provided to a customer in packaging that retains heat" or in packaging "specifically designed for hot food"
- "advertised or marketed in a way that indicates that it's supplied hot"
Both parts count. The food has to be hot, and it has to meet at least one of the five tests. Section 4.3 defines hot as "a temperature above 'the ambient air temperature'".
The notice gives rotisserie chickens, roasted chestnuts and soup as examples of food marketed as hot. So the same item can be zero-rated or standard-rated depending on how you sell it. The ingredients cost the same either way, but the net price, and so the food cost percentage, is different.
The line has been tested in court. In Sub One Ltd v HMRC [2014] EWCA Civ 773, the Court of Appeal considered Subway's toasted sandwiches and its meatball marinara. HMRC had treated them as standard-rated hot food, and the court dismissed Subway's appeal.
Splitting eat-in and takeaway sales on the till
If you sell both eat-in and takeaway, your net sales depend on getting the split right at the till. Section 3.3 says you'll "need to apportion your sales of cold food between those consumed on the premises (standard rated) and those taken-away". If you can't tell at the point of sale, "you must keep satisfactory evidence to support a fair and reasonable apportionment". Meal deals mixing hot and cold items are covered in section 4.7.
For food cost, use separate eat-in and takeaway till buttons, take net sales from the VAT report, and check the split in your daily cash count.
Count everything in the portion: oil, garnish, sauce, the side and the butter with the bread. Cost each ingredient at its edible-portion cost, after trimming and cooking loss:
How to run a yield test. Weigh the product as it arrives. Prepare it the way the recipe says: trim, skin, bone or cook it. Then weigh what's left that you can serve. Usable weight ÷ bought weight is your yield. Do it more than once and with more than one chef, because yields vary, and record the result on the recipe card. Repeat it if you change supplier or spec.
Example: yield. Fish fillets bought at £18.00 per kg with 75% left after skinning and trimming cost £18.00 ÷ 0.75 = £24.00 per usable kg. A 150g portion costs £3.60, not the £2.70 you'd get from the invoice price.
How do you calculate food cost percentage for a week or month?
The dish calculation tells you what food cost should be. The period calculation tells you what it was:
Food cost % = (opening stock + purchases − closing stock) ÷ food sales excluding VAT × 100
Opening stock plus purchases minus closing stock is your cost of sales, the same arithmetic HMRC uses in its Self Assessment helpsheet HS229 example (£2,200 opening stock + £42,578 purchases − £2,450 closing stock = £42,328 cost of sales).
Worksheet B below runs a full week: £3,200 opening stock + £5,400 purchases − £2,900 closing stock = £5,700 used, against £18,000 net food sales, so 31.7%. If you had divided purchases alone by sales, you'd get £5,400 ÷ £18,000 = 30.0%. The difference is the £300 of stock that went down over the week. Purchases-only figures are only right when stock is flat, which it rarely is. One bad stock count also spoils two periods, because this week's closing stock is next week's opening stock. A regular stock count at the same time each week keeps the figure honest.
What counts as food sales?
The bottom of the fraction needs as much care as the top. Food sales means what customers paid for food, after VAT and discounts, and nothing else.
| Item on the bill | In food sales? | Why |
|---|---|---|
| Food, after VAT | Yes | This is the figure you divide by |
| Drinks | No | Keep a separate drinks figure |
| Service charge | No | Under the Tips Act it goes to workers, so it isn't money the business keeps (see below) |
| Tips the customer adds on top | No | They go to workers too, and HMRC says "no VAT is due on the tip" |
| Discounts and vouchers | Take them off | Use what you received |
| Delivery fees | No | Keep them separate so they don't flatter food cost |
Example: one table's bill (illustrative)
| Line | Amount |
|---|---|
| Food at menu prices | £60.00 |
| 12.5% service charge | £7.50 |
| Total paid | £67.50 |
| Service charge passed to staff under the Tips Act | −£7.50 |
| VAT on the food (£60 − £60 ÷ 1.2) | −£10.00 |
| Food sales excluding VAT | £50.00 |
If the food cost £15, food cost is 30% of £50. Divide by £67.50 instead, and it comes out at 22.2%. That's a figure that looks good and means nothing.
Why service charge isn't your revenue
The Employment (Allocation of Tips) Act 2023 came into force on 1 October 2024 (commencement regulations). Its statutory code of practice says employers must "Pass on all tips and service charges to workers without deductions, except in very limited scenarios, such as deduction of income tax". The code says the Act's purpose is the fair allocation of "all tips, gratuities and service charges (including both automatically added and other voluntary service charges)".
So a service charge on the bill isn't money you keep, and it isn't a payment for food. Leave it out of food sales. The VAT side is separate. Section 2.3 of Notice 709/1 says: "If you make a service charge, it's standard-rated. But if the customer freely gives a tip above your total charge, no VAT is due on the tip." Either way, it stays out of food sales.
Free food needs a decision too. Section 5.8 of the notice says that if you give free meals to your employees, "no VAT is due". Section 5.7 treats free meals for customers or friends as business entertainment, so you can't reclaim the VAT on what went into them. Business entertainment (VAT Notice 700/65) says that input tax is "blocked from recovery under a special legal provision". For food cost, both are food used with no sale against it. Record them, so they don't turn up as unexplained variance.
What should you include in food cost?
Be consistent: count the same way every period, or the trend means nothing.
| Item | In or out of food cost | Why |
|---|---|---|
| Stock values | In, at cost price, not menu price | HMRC values stock at "the lower of cost and net realisable value" (BIM33135) |
| Credit notes and returns | Take off purchases | You didn't pay for that food |
| Food binned as waste | Already in, if you count properly | It's not in the closing count, so it shows up as food used |
| Staff meals | In the cost; record them separately | Otherwise they look like unexplained loss |
| Comps and voids | In the cost; record them separately | The food was used but not sold |
| Food transferred to another site or to the bar | Out at the site sending it, in at the site receiving it | Otherwise one site looks better and the other worse |
| Drinks | Out; keep a separate drinks cost | Mixing in drinks sales can hide food problems |
| VAT on purchases | Out, if you're VAT-registered | You reclaim it as input tax, and HMRC says "most food and drink of a kind used for human consumption is zero-rated" anyway |
Waste deserves a note. Some guides say unrecorded waste "makes food cost appear lower". It doesn't: binned food isn't in your closing count, so the period figure already includes it. What unrecorded waste hides is the reason your actual cost is higher than it should be.
What's the difference between theoretical and actual food cost?
Theoretical food cost is what your food should have cost, based on what you sold and your recipe costs. Multiply each dish's portion cost by the number sold, add them up and divide by food sales. Actual food cost is the period figure from your stock counts. The gap between them is your variance.
In worksheet B, theoretical is £5,220 (29.0%) and actual is £5,700 (31.7%), a £480 variance. Recorded waste, staff meals and comps explain £270, which leaves £210 unexplained. The unexplained part is where you look first: over-portioning, out-of-date recipe costs, deliveries short of what was invoiced, or theft.
Some guides say actual cost will "always be higher than theoretical". Usually it is, but not always. If actual comes out below theoretical, don't celebrate yet. Check for a closing count that's too high, a delivery invoiced in the wrong period, recipe costs that are higher than what you now pay, or portions that are smaller than the recipe says.
How does menu mix change food cost percentage?
Your overall food cost percentage is an average of your dishes, weighted by how many of each you sold. Change what people order and the figure moves, even when every recipe cost and price stays the same.
Example: three dishes, two weeks (illustrative)
| Dish | Net price | Portion cost | Dish food cost % | Sold week 1 | Sold week 2 |
|---|---|---|---|---|---|
| Burger | £12.50 | £3.25 | 26.0% | 200 | 150 |
| Steak | £22.50 | £9.00 | 40.0% | 50 | 120 |
| Pasta | £11.00 | £2.20 | 20.0% | 100 | 80 |
| Week 1 | Week 2 | |
|---|---|---|
| Food sales | £4,725.00 | £5,455.00 |
| Food cost | £1,320.00 | £1,743.50 |
| Food cost % | 27.9% | 32.0% |
| Cash left after food | £3,405.00 | £3,711.50 |
In week 2, food cost went up by about four points, and you kept £306.50 more after food. Nothing went wrong in the kitchen: more people ordered steak. Always read the percentage next to the cash figure.
How do discounts and promotions affect food cost?
A discount doesn't change what the dish costs to make, so the food cost percentage rises. Take a dish with a £14.00 net price and a £4.20 portion cost (illustrative). At full price it runs at 30.0%. At 25% off it's 40.0%, and on a two-for-one it's 60.0%.
That doesn't mean a promotion is a mistake. A quiet Tuesday with a 40% food cost can still bring in more cash than an empty room. What matters is that you know the cost, and that you track promotions separately so they don't hide a problem in the rest of the week.
How do supplier price rises feed through?
Recipe costs go out of date as soon as an invoice price changes. For context on general food prices, the ONS reported, in its CPIH and CPI bulletin, that the 12-month inflation rate for food and non-alcoholic beverages "was 1.3% in August 2026" (ONS, Consumer price inflation, released 16 September 2026). That's shop prices, not wholesale, so your own invoices are what count.
Example (illustrative): if fish goes from £18.00 to £19.80 a kg, at 75% yield a 150g portion goes from £3.60 to £3.96. On a £16.50 net price, that dish's food cost moves from 21.8% to 24.0%: 2.2 points, from one ingredient. Sell 300 a week and it costs £108 a week (£0.36 × 300). Recost the dishes that use your biggest-spend ingredients whenever their price changes, and recost the whole menu on a set date.
How do you set a menu price from a target food cost?
Turn the formula round:
Selling price excluding VAT = portion cost ÷ target food cost %
Then add VAT back for a standard-rated dish:
Menu price = selling price excluding VAT × 1.2
For a £4.20 portion at a 30% target, the net price is £14.00 and the eat-in menu price £16.80 (worksheet C). Then look at the number and decide. You might round it to £16.95, or decide the dish needs a cheaper garnish. The formula gives you a starting price. Where the dish sits on the menu, and how well it sells against your other dishes, is a menu engineering question.
How does food cost percentage relate to gross profit and markup?
Food gross profit (GP) percentage is the share of net food sales left after food cost. The two always add up to 100:
Food GP % = 100 − food cost %
So a 30% food cost is a 70% food GP. Markup is different: it measures profit against cost, not against the selling price.
Example: the markup trap, on a £4.20 portion
| Method | Net selling price | Food cost % | Food GP % |
|---|---|---|---|
| "70% GP" (price = cost ÷ 0.30) | £14.00 | 30.0% | 70.0% |
| "70% markup" (price = cost × 1.70) | £7.14 | 58.8% | 41.2% |
Same words, very different prices. A chef told to "put 70% on it" who uses markup will price the dish at roughly half what you expected.
What is a good food cost percentage?
Set your own target from your own costs (below). It's still useful to know what other operators report, as long as you know where the figure comes from.
The UK survey figure
The most detailed UK source we could open is the UKHospitality Christie & Co Benchmarking Report 2022 (abridged edition). The sample was 54 companies, covering 4,791 licensed managed outlets. The report says it "is based on results for the six months to December 2021".
- Across the whole survey, the gross profit margin on food sales was 67%. That's a food cost of 33%.
- By segment, food GP ran from 65.9% to 69%. Casual dining (a restaurant "where alcohol sales are chiefly ancillary to food sales") was the lowest at 65.9%, a food cost of 34.1%.
- The margin had risen. The report says food margins "improved by 3.1ppts". It links that partly to price rises and partly to "the temporary VAT reduction that applied to the sector during the survey period".
The 67% and 69% figures are read from the report's charts. The 65.9% for casual dining is stated in the text. So treat 67% with care. The sample was mostly pubs, bars and managed groups, it covers half a year, and that half-year was during a VAT cut.
The VAT cut that shaped those figures
HMRC's guidance on the temporary reduced rate sets out the dates. Food and non-alcoholic drinks for eating in, and hot takeaway food and non-alcoholic drinks, were charged at:
| Period | VAT rate |
|---|---|
| 15 July 2020 to 30 September 2021 | 5% |
| 1 October 2021 to 31 March 2022 | 12.5% |
| From 1 April 2022 | 20% (standard rate) |
The survey's six months to December 2021 cover both reduced rates. A business that kept its menu prices the same kept more of each sale while the rates were reduced. That pushed food GP up and food cost down. At 20%, the same prices give a higher food cost. When you compare yourself with figures from 2020 to 2022, allow for that.
Vendor ranges you'll see online
Software firms and trainers publish ranges too. Jelly, a UK kitchen software company, gives ranges such as 28–35% and calls them "trade benchmarks rather than surveyed figures". Treat ranges like that as opinion. They don't say which businesses, which years or which VAT treatment they're based on. The survey's segment split above is the only sourced UK figure by type of operation we found. We found none for cafés, takeaways or fine dining, so we don't give any.
Working out your own target
Work back from your own numbers. Decide what you need left over, then see what food can cost.
Example: working out your own target (illustrative numbers, per £100 of net food sales)
| Line | Amount | Where it comes from |
|---|---|---|
| Net food sales | £100 | |
| Labour for the kitchen and front of house | £32 | Your payroll ÷ your sales |
| Rent, rates, energy, card fees and other overheads | £30 | Your P&L |
| Profit you want before tax | £8 | Your plan |
| Left for food | £30 | 100 − 32 − 30 − 8 |
On those numbers, your target is 30%. Change any line and the target moves. Use your own P&L and recalculate when wages or rent change. Food and labour together are your prime cost, so set the two targets side by side.
Food cost worksheet
Copy this into a spreadsheet or onto paper and fill in the right-hand column. The example column uses the figures from this page. Every row is a sum you can do on a phone calculator.
A. One dish
| Line | How to work it out | Example: eat-in (20% VAT) | Example: cold takeaway (0% VAT) | Your dish |
|---|---|---|---|---|
| A1 Menu price | From your menu | £15.00 | £6.00 | |
| A2 VAT rate | 20% eat-in or hot takeaway; 0% most cold takeaway | 20% | 0% | |
| A3 Net price | A1 ÷ (1 + A2) | £12.50 | £6.00 | |
| A4 Portion cost | Sum of every ingredient at edible-portion cost | £3.75 | £1.80 | |
| A5 Food cost % | A4 ÷ A3 × 100 | 30.0% | 30.0% | |
| A6 Food GP % | 100 − A5 | 70.0% | 70.0% | |
| A7 Cash GP per dish | A3 − A4 | £8.75 | £4.20 |
The same £6.00 cold sandwich sold to eat in has a net price of £5.00 (£6.00 ÷ 1.2). Its food cost goes from 30.0% to 36.0% (£1.80 ÷ £5.00).
B. One period
| Line | How to work it out | Example (one week) | Your period |
|---|---|---|---|
| B1 Opening stock at cost | Last period's closing count | £3,200 | |
| B2 Purchases excluding VAT, less credits | Invoices dated in the period | £5,400 | |
| B3 Closing stock at cost | Count at the end of the period | £2,900 | |
| B4 Food used | B1 + B2 − B3 | £5,700 | |
| B5 Net food sales | Till report excluding VAT, service charge, tips and drinks | £18,000 | |
| B6 Actual food cost % | B4 ÷ B5 × 100 | 31.7% | |
| B7 Theoretical food cost | Σ (portion cost × number sold) | £5,220 | |
| B8 Theoretical food cost % | B7 ÷ B5 × 100 | 29.0% | |
| B9 Variance | B4 − B7, and B6 − B8 | £480, 2.7 points | |
| B10 Recorded waste, staff food, comps | From your logs | £270 | |
| B11 Unexplained | B9 − B10 | £210 |
C. Price from a target
| Line | How to work it out | Example | Your dish |
|---|---|---|---|
| C1 Portion cost | From the recipe card | £4.20 | |
| C2 Target food cost % | Your own target | 30% | |
| C3 Net price needed | C1 ÷ C2 | £14.00 | |
| C4 VAT rate | 20% or 0% | 20% | |
| C5 Menu price | C3 × (1 + C4) | £16.80 | |
| C6 Rounded menu price | Your call | £16.95 | |
| C7 Food cost % at the rounded price | C1 ÷ (C6 ÷ (1 + C4)) × 100 | 29.7% |
How often should you calculate food cost percentage?
- Per dish: whenever a recipe changes or a supplier price changes.
- Per period: weekly or monthly, whichever matches how often you can do a full stock count. Weekly shows a problem sooner. Monthly lines up with your accounts.
- Theoretical vs actual: every period you count, so you can see the variance trend.
Example: what one point is worth. On £18,000 a week of net food sales, one percentage point of food cost is £180 a week, or £9,360 over 52 weeks.
How do you lower your food cost percentage?
Work through the variance before you touch prices:
- Cost every recipe properly, at edible-portion cost, including the small items. Recheck when invoices change, and review your approved suppliers list when prices move.
- Portion to the recipe. Use scales, ladles and set scoops, and photograph what the plate should look like.
- Check deliveries against the invoice for weight, count and price, and chase credit notes. A delivery received check at the door catches short weights before they're paid for, and a food delivery check on every drop gives you the records to chase.
- Record waste, staff meals and comps so the unexplained variance shrinks to something you can investigate.
- Store and rotate stock so less goes out of date. Follow your safe food storage rules so nothing spoils early. Stock rotation, first in first out, means older stock gets used before newer stock. Daily checks such as a kitchen closing checklist help.
- Then look at the menu: reprice, re-spec or drop dishes with a high cost and low sales. If you swap an ingredient to save money, update the recipe card and your allergen information at the same time.
If you keep counts, waste logs and delivery checks in an app such as Pilla, each entry carries a time and a name, which makes the variance easier to trace.
Food cost percentage myths
| Myth | What's true |
|---|---|
| "Divide purchases by sales." | That's purchases, not food used. Adjust for opening and closing stock. |
| "Use the menu price." | Menu prices include VAT by law, so use net sales. |
| "70% markup is the same as 70% GP." | A 70% markup gives a 58.8% food cost on the example above. |
| "Lower is always better." | A very low figure can mean small portions, an over-counted closing stock or a missed invoice. |
| "There's an industry standard you should hit." | The UK survey figure (67% food GP) is one sample, from 2021, during a VAT cut. Use it as a reference and set your own target. |
Food cost percentage FAQs
Should packaging be included in food cost?
You can, if the dish can't be sold without it, as with takeaway boxes. Either way works if you do it the same way every period and note which you've done.
Does food cost percentage include drinks?
Keep drinks separate. They're bought, stored and priced differently, and mixing the two can hide a problem in either. Work out a beverage cost percentage the same way: opening drinks stock + drinks purchases − closing drinks stock, divided by drinks sales excluding VAT. In the same benchmarking report, the gross margin on wet sales across the survey was 66%. Drinks and food together count towards prime cost.
Is food cost the same as cost of sales in my accounts?
It's close, if your accountant counts food the way you do. Both use opening stock plus purchases minus closing stock. HMRC's manual says stock is brought into the profit calculation "at the lower of cost or market value (the modern rule being the lower of cost and net realisable value)" (BIM33110). Your accounts may combine food, drink and packaging, and they're done annually or quarterly. Your weekly kitchen figure is for running the kitchen. The two should roughly agree over a year. If they don't, check how each one treats stock, transfers and staff food.
What if I'm not VAT-registered?
Then you don't charge VAT, so your takings are your net sales. The other side changes too. Any VAT you pay on purchases can't be reclaimed, so it's part of what the food cost you. Most food is zero-rated anyway, but items that are always standard-rated, such as crisps and sweets, carry it.
Can I compare my food cost with another restaurant's?
Only if you both calculate it the same way: the same VAT treatment, the same handling of staff meals and transfers, and the same type of operation. Compare your own figure over time first.