Cost of Goods Sold for Restaurants

 In 1. David Scott Peters, Food Costs, SMART Systems


What does cost of goods sold refer to? In the most basic terms, cost of goods sold is “the cost of the product used to generate sales.”

The cost of goods sold calculation is used to calculate a cost of goods sold percentage for a given accounting period. The cost of goods sold calculation is also most valuable when it is broken down by categories, i.e., food, liquor, bottle beer, draft beer and wine. This is more effective when broken into categories because if, for instance, the pour cost is high, you can determine where the problem is. You can react by examining your draft system for problems due to foaming issues, because your draft numbers are high. Otherwise, if liquor pour cost had all categories lumped in one figure, you would not know where to look for the problem without redoing all of your work.

This is exactly what we will cover on Nov. 5 as part of the Take Action Restaurant Success Seminar Series. Cost of goods sold is one half of your prime cost, and we will cover it and all its related systems in this special one-day seminar. Come learn how to be a cost of goods sold rock star.


Restaurant Success Seminar Series

Controlling the Most Important Number in Your Restaurant… Prime Cost with a focus on Cost of Goods Sold

November 5 in Phoenix, Arizona

Learn more about the restaurant seminar here and review the standard cost of goods sold calculation below.

Standard cost of goods sold calculation

ABeginning Inventory[equals ending inventory for the last period]
B+Purchases[equals total purchases made for a given period]
C=Total Available[equals the total product available to be sold]
DEnding Inventory[equals total dollar value of the inventory counted at the end of a given period]
E=Product Used[equals the dollar value cost of goods sold or the actual product taken from the shelves]
F÷Sales[equals the total sales for given period]
G=Cost of Goods Sold %[represents how many pennies in product were used to generate a dollar in sales]


David Scott Peters is a restaurant expert, speaker, coach and trainer for independent restaurant owners. He is the founder of and the developer of SMART Systems Pro,an online restaurant management software program helping the independent restaurant owner remain competitive and profitable in an industry boxed in by the big chain restaurants. He and a team of experienced and passionate coaches help restaurant owners solve their biggest financial and employee challenges so they can run successful and profitable businesses. Learn more

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  • Sanjit Keskar

    How do you explain the fact that COGS for food does not include labour ( chef salary) or overheads such as fuel costs?

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