What Percentage Of Revenue Should Your COGS (Cost Of Goods Sold) Be?

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As a restaurant manager, you are likely aware of the importance of controlling your costs. But how do you know what percentage of your revenue should be allocated to Cost Of Goods Sold (COGS)? Is there an optimal number that will help ensure profitability? In this blog post, we’ll explore these questions and provide some strategies for improving your COGS performance so that you can maximize profits. Read on to learn more!

Understanding Cost Of Goods Sold (COGS)

– COGS is a term used to describe the cost of producing the goods or services that your restaurant offers. This includes raw materials, labor, and overhead costs associated with each item on your menu. In addition to these direct costs, there are also indirect expenses such as advertising or repairs that should be taken into consideration when calculating COGS.

Calculating Your COGS As A Percentage Of Revenue

– To determine what percentage of revenue should be allocated to COGS, you’ll need to calculate it as a proportion of total sales. Start by adding up all direct and indirect expenses for each item on your menu and dividing it by total sales. This will give you the overall COGS percentage for your restaurant which can then be compared to industry standards.

Strategies To Improve Your COGS Performance

– After you’ve calculated your COGS percentage, there are several strategies that can be employed to help improve your performance. These include reducing waste, maximizing efficiency in the kitchen, and negotiating better deals with suppliers. Additionally, it is important to track and analyze your COGS over time so that you can identify patterns and make informed decisions about how best to reduce costs.

Conclusion

– Calculating the right percentage of revenue to allocate to Cost Of Goods Sold (COGS) is essential for a successful restaurant business. By understanding what goes into calculating this figure as well as following some simple strategies to improve performance, you can ensure that you are setting yourself up for success.

 

 

Related FAQs

Cost of Goods Sold (COGS) is the total expenses associated with producing the goods or services that your restaurant offers. This includes raw materials, labor costs, and overhead expenses related to each item on the menu.
To calculate COGS as a percentage of revenue, start by adding up all direct and indirect expenses for each item on your menu. Then divide this figure by total sales to get the overall COGS percentage.
The optimal COGS percentage can vary from industry to industry, so it is important to research your specific market and compare your own results against the industry average.
To improve your COGS performance, you can reduce waste, maximize efficiency in the kitchen, and negotiate better deals with suppliers. Additionally, tracking and analyzing your COGS over time will allow you to identify patterns and make informed decisions about how best to reduce costs.
It is important to track and analyze your COGS on a regular basis so that you can stay up-to-date on cost trends. Depending on the size of your restaurant business and the amount of goods or services offered, you may want to track your COGS daily, weekly, monthly, or quarterly.
To reduce waste in your restaurant, start by identifying areas of excess and then coming up with solutions to eliminate it. Examples include implementing portion control measures, ordering food in bulk to save on costs, and making sure all kitchen staff is properly trained on proper handling techniques.
Maximizing efficiency in the kitchen involves streamlining processes and utilizing technology whenever possible. Consider investing in automated inventory systems that can help reduce order errors and simplify employee training. Additionally, ensure that all kitchen staff is properly trained in the most efficient methods of food preparation and handling of ingredients.
When negotiating with suppliers, it is important to be aware of industry standards and know what you are willing to pay for each item on your menu. Make sure to ask questions and get a better understanding of pricing before committing to anything so that you can make an informed decision. Additionally, consider buying in bulk if possible as this can often result in savings.
Tracking your COGS over time will help you identify patterns and make decisions about how best to reduce costs. When tracking your COGS, it is important to look at the “big picture” and consider all costs associated with each item on your menu as well as total sales. This will allow you to better understand what is driving up and down costs so that you can make appropriate adjustments to increase profits.
Seasonality has a big impact on COGS since certain items may be more expensive in certain seasons due to availability or demand. To prepare for this, try negotiating with suppliers in advance or ordering more inventory during low-demand months so that you don’t have to pay a premium when peak season arrives.    

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