The short answer is no.
Of course we need to keep an eye on our food cost and of course we need to know what our dishes cost (more on this later) but only looking at the food cost or beverage cost as a percentage doesn't help us. For instance in large companies is very common to set the food cost at around 25% and this will most likely be a Key Performance Indicator for the Executive Chef and the one thing he will receive the most grief for.
This is especially true when we look at individual dishes, rather than the whole menu. For instance you may have a dish with Lobster or and expensive cut of beef and selling it at 4x cost (plus 20% VAT) may just make it too expensive or not competitive. Say for instance this dish cost you £5 per portion, you should sell it at £24 (£5x4cost +20% VAT)but as this would be too much you decide to sell it for £19.95 or £16.63 + VAT, which is 30% food cost (£5/£16.63 x 100).
Now take a normal dish, say a pasta, which costs you £2.00 per portion and you resell at £2.00 x 4 +VAT = £9.60.
PASTA DISH GROSS PROFIT: £6.00
LOBSTER DISH GROSS PROFIT: £11.63
Now let's pretend these are both pasta dishes, one with Bolognese and one with lobster. Your customers will only have one pasta dish per meal. Which one would you rather sell? You can play with the figures but the idea stays the same, sometimes we need to look at absolute profit rather than food cost as a percentage.
On a little side note, I think it's very important to maintain some sort of minimum price for all our dishes in a certain category. For instance your pasta category. If you have a pasta with tomato sauce on the menu you don't want to just look at the food cost to set up your price as the price (and the gross profit) may be too low and if you end up selling loads of this dish, yes you will have a very low food cost at the end of the month, but your bank balance will be very low too!
Alan shares his experiences, struggles and tips to help other small restaurant operators.