Understanding the Average Inventory Formula for Restaurants

As a restaurant owner, there's no doubt that managing inventory is crucial to your success. But have you ever stopped to think about what drives product loss? Is it spoilage, theft, or something else entirely? For many restaurateurs, the answer lies in sales - when products don't sell, they simply take up space on your shelves.

In this article, we'll dive into the average inventory formula and explore how to calculate food cost. We'll also discuss why calculating food cost is more than just dividing your purchases by your sales.

The Average Inventory Formula

The average inventory formula is simple yet powerful: Beginning Inventory + Purchases = Total Available - Ending Inventory = Product Used / Sales = Cost of Goods Sold %. To put it simply, you start with your beginning inventory (what's left on the shelves from the previous period) and add in any new purchases. This gives you your total available stock.

Next, subtract your ending inventory (the amount remaining at the end of the period) to get your product used. Finally, divide this number by your sales to calculate your cost of goods sold percentage.

Why Calculate Food Cost?

Calculating food cost is essential for restaurants, as it helps you understand where your profits are coming from - or not. By accurately tracking your food costs, you can:

* Identify areas for improvement in your inventory management

* Make informed decisions about ordering and purchasing

* Ensure that your cash flow is healthy and not tied up on the shelves

Common Inventory Mistakes

Many restaurateurs make common mistakes when calculating their food cost, such as ordering too much product and then not using it. This can lead to inflated food costs and decreased profits.

To avoid this pitfall, it's essential to regularly take inventory of your stock levels and adjust your ordering accordingly. By doing so, you can ensure that your cash flow is healthy and your customers are happy with their dining experience.

Calculating food cost may seem like a daunting task, but by following the average inventory formula, you'll be well on your way to understanding this critical metric for your restaurant. In future articles, we'll delve deeper into the world of food costing and provide you with even more tools and strategies to optimize your inventory management.

Average Inventory Formula: Beginning Inventory + Purchases = Total Available - Ending Inventory = Product Used / Sales = Cost of Goods Sold %

Average inventory formula restaurant