How Much Do Small Restaurants Spend on Food? The Complete Guide
You’re thinking of opening a small restaurant that will accommodate an intimate number of patrons at any one time. Surely, since you’ll have less staff, less space, and fewer customers, your food spending will be less as well. How much do small restaurants spend on food?
The average amount of food spending for restaurants is on the lower end between 20 and 25 percent of total sales volume, which is more realistic of a small restaurant. However, factors such as food quality, cuisine, or seasonality can drive up the price of your small restaurant spending.
Are you sure whether your establishment even counts as a small restaurant? Curious how you can bring down food prices or create a more reasonable budget for food? In this complete guide, we’ll tell you all that and more. Make sure you keep reading!
What Constitutes a Small Restaurant?
If your restaurant is on the lower end of those size parameters or if it’s even less than that, then we’d say you have a small restaurant. An establishment of this size may be able to fit 10 to 20 seats comfortably with about 24 inches of space between tables, maybe as much as 30 inches. Your dish room may measure 175 square feet or under.
Examples of small restaurants including catering spaces, pop-up restaurants, fast food establishments, and even technically food trucks. Like any full-sized or larger establishment, a small restaurant may serve any type of cuisine, just on a more exclusive basis due to the size of your building.
How Much Money Do Small Restaurants Spend on Food?
In the world of restaurants, the amount of money spent on food has a specific term: food costs. The food cost is expressed as a ratio between the amount of money you spend to accrue ingredients for the dish versus how much money you earn on the dish. We’ve talked about this on the blog before, but it’s worth the refresher now with an example.
A Food Cost Example
Let’s say on your menu is a cheeseburger. You need to take all the parts of the burger and price them out individually to determine the food costs.
For example, cheeseburger buns cost $2 to $4 for a pack of eight. That’s $0.25 to $0.50 per bun.
How expensive burger patties are can depend very much on if you use real meat as well as the leanness of the meat and the type of meat (beef versus grass-fed or Wagyu beef). To clarify and streamline the example, we’ll say the patties cost $10. If you get six patties, that’s about $1.60 per patty.
Cheese prices can also fluctuate significantly depending on the type of cheese. Since cheddar is about as classic as it gets with a burger, we’ll use that as the cheese for this dish. You might pay $3 for 11 slices of cheddar. That’s $0.27 a slice.
If your customer wants all the fixings, that’s your job to provide them. Pickles cost about $5, but the number of pickles per jar is not uniform. You might get 16 to 30 pickles per jar. Again, for example’s sake, let’s say you have 30 pickles in a jar. That’s $0.16 a pickle.
Large tomatoes are priced at about $3 for 16 fluid ounces. We’ll say you have 10 tomatoes in a pack, which is $0.3 per tomato. You’re probably not using a whole tomato for one burger, but let’s just say you are so the pricing doesn’t get even more minute.
So, when you put that all together, the cost to make the burger with pickles and tomato is about $3. You need to make a profit though, so you might sell the burger for $6 to $8.
Calculating the Total Volume of Sales
Once you know your small restaurant’s food costs for each item on your menu, you can take the food cost and then determine your food spending as a percentage. For example, let’s say that in one week, your restaurant spends $5,000. This doesn’t only include the price of food, by the way, but labor costs, employee benefits, and payroll taxes.
By earning $20,000 in a week, your food (and labor) costs are around 25 percent. If you just want the food costs as a percentage, you can omit the labor and related expenses.
As we discussed in the intro, food spending between 20 and 25 percent is the average for smaller establishments, including fast-food restaurants. Larger table-service establishments might have their food and labor spending percentage around 30 percent on the low side and 40 percent on the high side.
If so, 40 percent is considered a rather bloated number considering restaurants of all sizes average 28 to 35 percent spending on food and labor.
What Factors Influence Restaurant Food Spending?
We must use a range when describing how much money your small restaurant might spend on food (and labor if you’re adding that in too) since many factors can increase or decrease your own spending above that 25-percent range. It’s okay if you’re hovering around 26 or 27 percent with your spending, and especially if you do tally in labor too.
If your spending is too close to 30 percent though and you’re a small restaurant, we recommend you read this next section carefully. Some of the following factors may be forcing up your restaurant costs too high. Fortunately, later in this article, we’ll tell you how to determine if you’re overspending and how to control what you spend on food.
For now, here’s what might be the culprit of your high food spending percentage.
What type of cuisine does your restaurant specialize in? Remember, even though your establishment might be small in size, there’s no reason you can’t be big in flavor. If you serve expensive cuisine such as seafood or steak, then your food spending costs will be higher than a fast food joint or one that serves cheaper foods like burgers, tacos, or pizza.
Do you incorporate ingredients such as saffron or fugu fish into a lot of your dishes? Maybe you garnish your desserts with edible gold. These are some of the most expensive foods in the world, so you should expect some pretty overstuffed food costs to boot. Fugu, for instance, costs $200 per each fish. It can also be deadly, which is another risk of putting this fish on your restaurant menu.
For a 25-ounce bottle of edible gold that’s 24 carats, you’re looking at $15 a pop. Sure, that’s not too bad on its own, but 25 ounces doesn’t get you very far if you put edible gold on a lot of your desserts. Oh, and Kobe beef is $100 per pound, give or take, so it too is incredibly costly.
Type of Menu (Fixed or Seasonal)
A second consideration for your restaurant costs is your menu. Do you have a fixed menu where you add new specials for a few weeks (or months), but for the most part, it’s the same old, same old? This isn’t necessarily a bad thing, as it allows your customers to develop preferences and order a regular dish. You might be able to see someone come into your small restaurant and know exactly which meal they’ll order!
Another benefit to a fixed menu is that food costs remain pretty steady throughout the year. Yes, you do have to factor in seasonality. If a food is out of season, obtaining it will be pricier, but not enough to hugely inflate your food costs month by month.
Compare that to running a small establishment with a seasonal menu. Since you’re only selling what’s in season, you don’t have to worry about the higher costs associated with buying out-of-season foods, that’s true. However, you need to buy food at a higher rate than a restaurant with a fixed menu.
The fixed-menu establishment will only replenish its food supply when it begins running low, as any item on the menu isn’t going anywhere. Since your menu changes several times a year, you need to order food just as often. That will lead to higher food costs that could be closer to 30 percent.
You also have to be really, really good at predicting the demand of a dish among your audience if your small restaurant is seasonally run. If you order too much of an ingredient or food and it doesn’t sell, then you end up with a surplus of that food. Since you can’t use it for the next season’s menu, you either have to donate the food or toss it, neither of which drives a profit for your restaurant.
You know the saying that you get what you pay for, right? That certainly applies to the food purchased by restaurants of any size. If your customers have come to know and love dishes like fugu fish and Kobe beef on your menu, then they’ll expect a certain quality of your restaurant each time they visit. You’ll also feel the pressure of keeping your menu interesting, which means you’ll try different types of cheese or chocolate.
Here are some of the most lavish alternatives to everyday food that are high-quality and high-cost too:
- Pule: Pule is a type of cheese that’s harvested in very specific circumstances. It’s exclusively produced in Serbia from donkey milk. Like any limited food, pule is expensive. For a pound, you might pay $1,700.
- Acorn-fed Iberian ham: Not all ham is the same! In Spain, the pigs feast on nothing but acorns to produce a ham called Jamón Ibérico de Bellota. This causes the ham to have a nutty flavor profile. Besides its unique test, acorn-fed Iberian ham is aged before it’s sold, sometimes for as long as three years. The whole ham might cost $1,400, and for a pound, it’s $100.
- Knipschildt chocolate: You’ll really wow your patrons when you serve them a dessert that features Knipschildt chocolate. These truffle madeleines come from Fritz Knipschildt, a chocolatier based in Denmark. The combination of Valrhona dark chocolate and Perigold truffles makes these chocolates about as rich and decadent as you get. It’s no wonder each cost $250.
- Matsutake mushroom: The pine or Matsutake mushroom only grows in such parts of the world as eastern Europe, Asia, and Oregon. Since it’s tough to come by, you might pay $1,000 for a pound of this mushroom.
- Yubari melon: Japanese-produced Yubari melon has a great flavor. Since this fruit is imported directly from Hokkaido, for two of them, you might be looking at prices of $28,000.
- Densuke watermelon: Another Japanese fruit, Densuke watermelon is carefully harvested in limited numbers. That’s why an 18-pounder costs around $6,000.
- Almas caviar: No caviar is really cheap considering it’s made from fish, but Almas caviar is some of the costliest. The term “Almas” is a Russian word that means “diamond.” For two pounds, its cost is $18,000.
How Can You Determine Whether You’re Spending Too Much on Food?
Even if you’re not serving those high-scale foods at your small restaurant, your food spending can still be high. How do you know what’s reasonable to spend on the food you’re serving? You need to review your establishment’s prime costs.
What are prime costs? The prime costs encompass your total labor cost, your pour cost (or the cost of liquor), and the food costs. You can tally up your prime costs by reviewing your total cost of goods sold at your small restaurant.
Don’t be surprised if your prime costs are a lot higher than your food costs! This is normal, as you’re not only adding up your food costs, but many other expenses associated with running a restaurant as well. If your prime costs are 60 percent higher than your food costs, even 65 percent, then you’re right in that sweet spot.
If you want to take an even deeper glimpse into which area you’ve overspent on, then calculate the prime costs for labor versus those for food. It’s okay if one prime cost is elevated compared to the other, just as long as there’s a balance between the two so your small restaurant is making a profit. That said, once you get into prime costs that exceed 65 percent, you need to scale back your spending in one or more areas.
Tips for Controlling Food Spending
If your food spending is one of your bigger prime costs and simply too high to be sustainable for your small restaurant, then it’s time to make some changes. Here are some tips your restaurant can follow today for lower food costs.
Use Food Scraps Wisely
Food scraps are common in many restaurant kitchens. That’s probably the same story for your small restaurant, right? Please don’t throw away food scraps, as they can be used in a lot of different, creative ways.
Let’s say you have roasted turkey or chicken left from yesterday’s cooking. Shred the poultry and then add it to a stew or soup. Old bread that’s gone a bit stale is ideal for making bread pudding, French toast, breadcrumbs, and croutons.
All those vegetable scraps your kitchen has– including mushroom stalks, carrot peels, and onion skins–can get reintegrated into a vegetable-based stock.
How do you get your customers interested in these dishes? Make the meal your daily special!
Make Sure You’re Getting the Best Price from Your Vendor
We hope you researched your food vendor before you began a working relationship with them. Some vendors may offer foods and ingredients at slightly lower or even higher prices, and if so, you want the more inexpensive foods. Just make sure the prices aren’t so steeply low, as that can indicate you’re not getting quality food.
Stop Wasting Food
Yes, you know what to do with your food scraps, but that’s not the only area of food waste your small restaurant has to concern itself with. If you buy food, forget about it, and it expires before you get to use it, that’s a tremendous waste of money.
Restaurants recommend the FIFO method, which stands for first in, first out. In other words, when you buy new food or ingredients, use the older stuff before you get to what’s new. This should prevent food expiry issues going forward.
Another great way to prevent food waste is to have an inventory tracking system. You’ll likely rely on computer software for this. When the time comes to reorder food, you can check how much inventory you need and then decide which foods you should replenish and which can wait until the next time you order.
Make Sure What You’re Spending Is What You Think You’re Spending
Do you think you have a good idea of your small restaurant’s food spending? That’s called theoretical food costs, which is a guestimate or projection of your spending. Every now and again, you need to sit down and compare your theoretical numbers with your actual spending.
It could turn out that because you thought lobster was priced a certain way that you’ve assumed it’s been that price all along, when really, it’s $5 higher. Calculate theoretical and actual spending on all foods and ingredients on your restaurant’s menu. It’s a time-consuming venture, but a very worthwhile one.
Small restaurants, due to size and customer restraints, won’t spend as much on food and labor as larger establishments. Even still, your restaurant can overspend on food if you’re not careful. Now that you know how to calculate your spending, where to cut back, and how to do so, your small restaurant is ready to spend smartly on food so you can put more money in your collective pocket!