Restaurant food costs may not be rising at the same breakneck pace they once were, but keeping them under control remains a daily challenge. Ingredient price fluctuations, higher labor and utility expenses, and ongoing supply chain uncertainty can quickly eat into already-thin margins.
Menu prices continue to reflect that pressure. According to the U.S. Bureau of Labor Statistics, food-away-from-home prices increased 3.4% between July 2025 and July 2026, including a 3.4% increase for full-service meals and a 3.3% increase for limited-service meals.
At the same time, customers are paying closer attention to value, leaving operators with less room to simply raise prices whenever costs climb. Reducing food costs now requires a closer look at purchasing, inventory, portion control, waste, and menu performance.
So, where should restaurant operators begin, and how can technology help them protect profitability without sacrificing quality or the guest experience?
Know Your Food Cost Percentage
You cannot reduce food costs effectively without knowing where they currently stand. Your food cost percentage shows how much of your food sales is being spent on ingredients. Tracking it regularly can help you spot rising prices, excess waste, inconsistent portions, and other issues before they take a bigger bite out of your margins.
Looking at your overall percentage is a good starting point, but the real insight often comes from reviewing food costs by menu item, category, and location.
How to Calculate Food Cost Percentage
To calculate your restaurant’s food cost percentage, divide the cost of goods sold by total food sales, then multiply the result by 100.
Food Cost Percentage = Cost of Goods Sold ÷ Food Sales × 100
Your cost of goods sold can be calculated using this formula:
Beginning Inventory + Purchases − Ending Inventory = Cost of Goods Sold
For example, if your restaurant has $30,000 in food costs and $100,000 in food sales for the month, your food cost percentage is 30%.
Be sure to use figures from the same time period and conduct inventory counts consistently. Otherwise, the result may not give you an accurate picture of your performance.
What Is a Good Food Cost Percentage?
Many restaurants aim for a food cost percentage between 28% and 35%, but there is no single number that works for every operation. Your ideal percentage will depend on your restaurant concept, menu mix, ingredient quality, pricing, portion sizes, and other operating expenses.
A steakhouse, for example, may carry a higher food cost percentage than a pizzeria but generate more gross profit dollars per dish. Instead of relying on an industry average alone, compare your actual food cost with your target cost and watch how that number changes over time.
Practical Ways to Lower Your Food Costs
Reducing restaurant food costs does not have to mean buying lower-quality ingredients or removing every expensive item from the menu. Small improvements across purchasing, preparation, inventory, and menu management can add up to meaningful savings.
The goal is to identify where money is slipping through the cracks and make changes that your team can consistently maintain.
Reduce Food Waste and Spoilage
Every ingredient that is over-prepared, improperly stored, or allowed to expire represents money your restaurant cannot recover. Begin tracking what gets thrown away and why. Separating spoilage, preparation waste, incorrect orders, and untouched guest food can help you identify the source of the problem.
Use clear date labels, follow first-in, first-out inventory practices, and train employees on proper storage and preparation. Reviewing waste logs regularly can also reveal opportunities to adjust purchasing quantities or repurpose ingredients across multiple dishes.
Tighten Portion Control and Standardize Recipes
A little extra food on each plate may not seem expensive, but those oversized portions add up quickly across hundreds of orders. Standardized recipes give employees clear instructions for ingredient quantities, preparation, plating, and yield.
Use portion scoops, scales, ladles, and other measuring tools to improve consistency. This helps control costs while ensuring guests receive the same experience no matter who is working in the kitchen.
Recipes should also be reviewed whenever ingredient prices or portion sizes change. A dish that met your cost target six months ago may no longer be performing the same way today.
Engineer and Re-Price Your Menu
Menu engineering helps you understand which dishes are popular, which are profitable, and which may be quietly dragging down performance. Compare each item’s food cost, selling price, contribution margin, and sales volume rather than focusing on food cost percentage alone.
You may find opportunities to feature high-margin favorites more prominently, adjust the ingredients in an underperforming dish, or remove items that create excess inventory and waste. When price increases are necessary, make them strategically instead of applying the same increase across the entire menu.
Negotiate with Suppliers and Buy Smart
Strong supplier relationships can help your restaurant access better pricing, purchasing programs, product alternatives, and more reliable service. Review contracts and invoices regularly, compare available options, and ask suppliers about volume discounts or comparable products that may offer a better value.
Buying in bulk can reduce the price per unit, but only when your restaurant can use the product before it spoils. Base purchasing decisions on actual usage and demand instead of assuming the largest case size is always the best deal. Joining a group purchasing organization can also provide access to negotiated pricing and rebate opportunities that may not be available to an individual restaurant.
Manage Inventory and Ordering
Too much inventory ties up cash and increases the risk of spoilage, while too little can lead to stockouts, emergency purchases, and disappointed guests. Set par levels using sales history, current demand, delivery schedules, and seasonal changes.
Conduct inventory counts on a consistent schedule and compare what you purchased with what you sold. Large differences between expected and actual usage may point to waste, incorrect portions, receiving errors, or theft.
Inventory and purchasing technology can make this process easier by organizing order history, monitoring price changes, and giving operators a clearer view of what is being used across the restaurant.
Programs to Help You Control Food Cost
One way to control your food cost is to leverage the buying power of Dining Alliance. With access to competitive food programs, restaurant operators can unlock savings and take advantage of manufacturer rebates. We have a whole team dedicated to helping restaurant operators like you increase their rebate checks. Our team of experts will help you find opportunities to switch to our manufacturers’ items to decrease cost and increase quality.
Here are some of the programs you get access to as a Dining Alliance member:
Produce Program
We partner with Fresh Alliance and the best local produce distributors to ensure high-quality produce arrives at your restaurant at the industry’s most competitive prices.
Meat Program
Our meat suppliers provide members with superior quality products for your center of the plate needs.
Seafood Program
Great for high volume seafood buyers and specialty restaurants, we offer a premium price equation designed to manage the flux of seafood cost for our members.
Coffee Program
Benefit from our group volume pricing and significant savings on multiple brands such as Folgers, 1850 Coffee, and Cafe Bustelo.
Dairy Program
Our dairy suppliers provide superior quality products straight to your operation. We work with local providers to bring you quality products designed specifically for your restaurant.
Baked Goods Program
Take advantage of our partnership with top bakeries across the country that offer negotiated discounts and savings on high quality pastries and bread products!
The Benefits of Using Technology
Nowadays, operators need to know where every penny is coming and going. Knowing your food cost is essential to running a successful restaurant– especially when prices are increasing every day.
Stay ahead of price changes with the help of technology. Having a more accurate picture of your food cost can help determine what’s working and what is taking away from your bottom line.
Orderly, our food cost management technology, provides restaurant operators with their food spend, sales, purchases and cost of goods sold. The dashboard is updated weekly to help keep your restaurant profitable. You can get a complete overview of the last four weeks of your food spend, check for trends and know when you’re over budget.
Food cost will always be a key player in your business. You need to be ready for prices changes as they occur. Partnering with Dining Alliance can help you reduce your food cost, keep track of price increases, and put more money back into your bottom line.
Contact us today to get started!
Frequently Asked Questions
How can restaurants reduce food costs without lowering quality?
Restaurants can reduce food costs by controlling portions, limiting waste, tracking inventory, comparing supplier pricing, and adjusting low-performing menu items. The goal is to spend smarter,
How does a group purchasing organization (GPO) lower food costs?
A GPO combines the purchasing power of many restaurants to negotiate better pricing and contract terms with suppliers. Dining Alliance members can also earn rebates on products they already purchase.
What causes food costs to increase in restaurants?
Food costs can rise because of inflation, supply disruptions, seasonal availability, inconsistent portions, spoilage, overordering, and supplier price changes. Regular cost reviews help operators catch increases early.
How can restaurants reduce food waste and spoilage?
Track what gets thrown away, follow first-in, first-out inventory practices, label products clearly, and order according to actual demand. Standardized recipes and proper storage also help prevent avoidable waste.
How often should restaurants update menu prices?
Restaurants should review menu prices at least quarterly and whenever ingredient costs change significantly. Pricing decisions should also consider demand, profitability, portion size, and the value guests receive.
How does inventory management help control food costs?
Accurate inventory data helps restaurants avoid overordering, prevent stockouts, and identify unusual product usage. It also gives operators a clearer picture of what they have, what they need, and where waste may be occurring.
What is menu engineering, and how does it reduce food costs?
Menu engineering compares each item’s popularity and profitability. Restaurants can use those insights to promote strong performers, improve or reprice underperforming dishes, and remove items that create unnecessary cost or waste.
