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How to Understand and Control Your Food Cost Variance

July 9, 2020 by FoodBAM Admin

Have you ever reviewed your invoices and noticed that the price of an ingredient changed from the previous month?

It’s likely that you have. Prices are seasonal, which means they can change often. While unideal, it’s how the supplier industry works.

The difference you are seeing is called your food cost variance – the actual food costs vs. your expected food cost.

So, what’s causing this change, and how can it under control? Keep reading to learn more about food cost variance, how to calculate, and, more importantly, a few ways you can keep it under control.


Food cost variance is important for all restaurants to measure and be aware of. By tracking your food cost variance, you can keep better check on your food pricing. Additionally, you can better calculate a food cost percentage, build sales forecasts, and better understand your supplier and inventory efforts.

Food cost variance can be a positive or negative metric:

  • Positive food cost variance: your food costs are lower than anticipated
  • Negative food cost variance: your food costs are higher than anticipated

This is important to know because, a negative food cost variance can represent an issue in your purchasing process and skew your ability to accurately forecast profits.

A profitable and efficient restaurant will have low food cost variance. If any numbers deviate from their standard costs, they will be able to thoroughly explain why.


In order to calculate your food cost variance, you will need a few pieces of data.

Actual costs

  • Actual Price: what you are currently paying for a specific ingredient. This can vary based on factors like market trends, seasonality, etc.
  • Actual Quantity: the amount of a specific ingredient you are currently buying

Standard costs

  • Standard Price: the average price of a specific ingredient over a set period of time
    • The historical price data will allow you to adjust any fluctuations in market pricing for the specific ingredient
  • Standard Quantity: an estimate of the quantity you expect to buy
    • It’s important to factor in additional quantities for breakage

Standard costs can be easily identified from your invoice data or through tools like FoodBAM.

Once you have all the data needed, the formula to calculate your food cost variance is straightforward:




Now that you have calculated your food cost variance, you can begin working on ways to better control it.

A few ways you can control your food cost variance are:

  • Talk to your supplier: work with your supplier and create a strategic partnership that will benefit you both. Talk about lowering your pricing. Work on improving your cost, yield, and utilization for all ingredients on your list. This may even mean looking at opportunities for a new supplier or product
  • Monitor market prices: the best way to ensure you are getting a good deal on your food is to track market prices
  • Establish and maintain a strong inventory process: staying on top of your inventory is key. Develop a process that will allow you to accurately define stock levels and rotate food. Understand key details like your inventory turnover rate or average days on hand
  • Consistency is key: being consistent is a key way to keep costs in check. Ensure that your chef and BOH stay on compliance regarding recipe prep, production, plating, and presentation

Food cost variance should be calculated and tracked on a regular basis. This will allow you to see if your variance is getting any better or maintaining.


Now that you have the tools needed, it’s important that you regularly track your food cost variance. It can be a lot of work and require patience, but the information will directly benefit your business.

By knowing your food cost variance, you will have a better understanding of how your operation is doing. You will be able to create accurate sales forecasts and better understand your procurement efforts.

Tools like FoodBAM are a great solution to help your restaurant conquer food price variance. FoodBAM helps you track your inventory and analyze your purchase data all in one place. Interested in learning more? Request a demo!

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