What’s a good food cost percentage? It depends on your restaurant. A fine-dining room and a quick-service counter run on different numbers, which means a single target won’t fit everyone. Despite that, benchmarks give you a solid starting point.
Here, you’ll find average food cost percentages for Canadian restaurants by type. Then you’ll see how to calculate yours and how it connects to labour and profit margin. You’ll also find practical ways to lower it.
What Is a Restaurant Food Cost Percentage?
Restaurant food cost percentage is the share of your food sales that goes toward ingredients. In other words, it shows how much of every food-sales dollar covers the cost of making it. Because it’s a percentage, you can compare it against restaurants of any size.
Why does it matter? Calculating your food cost regularly shows you where money leaks out. Plus, small gains add up fast: a 1% improvement on $800,000 in annual food sales adds $8,000 to your profit. Better yet, you don’t need a single extra guest to earn it.
What Is the Average Food Cost Percentage for Restaurants?
What’s the industry standard food cost percentage?
Well, most full-service restaurants land between 28% and 35%. Quick-service and fast-casual operators tend to run lower, at roughly 25% to 32%. Streamlined menus and high volume help keep their costs down. Catering sits lower still, at around 22% to 30%.
But here’s the catch: there’s no single ideal food cost percentage. Your concept and menu shape it. Pricing and your operating model are also shifting factors to consider.
That said, a number above 35% for more than a few weeks usually signals a problem. Waste and outdated menu prices are the usual suspects.
Food Cost Benchmarks by Restaurant Type
A healthy food cost looks different from one restaurant to the next. The ranges below give you a starting point, so compare yourself to businesses that run like yours.
Quick-Service and Fast Casual
Quick-service and fast-casual restaurants typically land at 25% to 32%. Streamlined menus and high volume help keep costs down.
Even so, ingredient sourcing and prep waste remain the key drivers. A daily waste log and standardized prep batch sizes help you keep both in check.
Family-Style and Casual Dining
Family-style and casual dining restaurants typically sit between 28% and 35%. Where you land depends on menu pricing and how closely you control portions and waste.
To keep your number steady, compare theoretical and actual food cost every week. Costing your highest-volume recipes is a good first step.
Fine Dining
Fine-dining restaurants usually run a little above the full-service range. Premium ingredients push costs up, and higher menu prices help balance that out. Labour runs heavy in fine dining, at roughly 35% to 45% of sales.
Because of that, every point of food cost counts when prime cost can reach 65% to 72%.
Pubs, Bars and Liquor Cost Percentage
Pubs and bars have two numbers to watch. Food cost still applies, and liquor cost percentage covers the other half. Beverage-heavy operations typically run 18% to 26%. Pour control and spec adherence drive that number, so overpouring can quietly eat into your margin.
To stay ahead of it, track food and beverage costs separately and reconcile your liquor inventory weekly. If your overall number climbs, you’ll know straight away which side to look at.
Catering, Hotels and Camps
Catering typically runs lower, at around 22% to 30%. Costs depend on per-head accuracy, so pre-cost every event before you confirm pricing.
After the event, compare actual costs against your budget to see what you missed. Track what’s left over after each event, since unused food is a cost you’ve already paid. Hotels and camps that feed set numbers of guests can use the same per-head approach.
How to Calculate Your Restaurant’s Food Cost Percentage
Your food cost percentage only helps if the number is accurate. That means counting inventory and recording purchases the same way every period. Here’s how to calculate it for a single dish or your whole restaurant:
The Food Cost Percentage Formula
Calculating food cost takes one simple formula. Divide your ingredient cost by your food sales, then multiply by 100.
Food cost percentage = (Ingredient cost ÷ Food sales) × 100
You can use it on a single dish or on the whole restaurant. For example, a pasta dish that costs $4.50 in ingredients and sells for $15.00 has a food cost of 30%. Running it on each dish shows you if the price is right, which makes it a core part of menu costing.
Actual Food Cost vs Theoretical Food Cost
Theoretical food cost is what you should spend if every recipe is followed exactly, with no waste or theft. Actual food cost is what you actually spend, so the gap between the two shows where money is slipping away. Anything above 2 percentage points is worth a closer look.
To find your actual number, add your purchases to your opening inventory. Then subtract your closing inventory to get the cost of food used. Divide that by your food sales and multiply by 100.
A Worked Example in Canadian Dollars
Say you want to check your food cost for the month. Here’s what your records show:
- Opening inventory: $5,000
- Purchases: $12,000
- Closing inventory: $4,000
- Food sales: $40,000
Food sales should cover food only, so leave out beverages and gift cards.
First, add your purchases to your opening inventory to get $17,000. Subtract your closing inventory, and you’re left with $13,000 in food used. Divide that by $40,000 in food sales and multiply by 100 for an actual food cost of 32.5%.
That sits inside the 28% to 35% range. Now suppose your recipes put theoretical food cost at 30%. That 2.5-point gap is above the 2-point mark, so it’s worth finding out where the extra $1,000 went.
Prime Cost, Labour and Profit Margin Benchmarks
Food cost is only part of the picture, since labour takes a similar share of your sales. Together, they make up your prime cost, which shows how much of every sales dollar is left for rent and profit.
What Is a Good Prime Cost for a Restaurant?
Prime cost is your food and beverage cost plus your total labour cost, divided by sales. Labour covers wages and benefits, plus the employer share of CPP and EI.
Most operators aim for 55% to 65%, and 60% is a common target. Once you pass 65%, there’s rarely enough left to cover rent and still turn a profit.
Say you bring in $85,000 in a month and your prime cost is $53,550. That’s 63%, which is 3 points over a 60% target and costs you $2,550 a month.
Since the right target varies by concept, your own trend matters most. When it climbs, find out if food and beverage or labour is driving it.
Restaurant Labour Cost Percentage
Your labour cost percentage is the other big piece of prime cost. Statistics Canada figures put wages and benefits at about 32% of revenue in 2024. Full-service restaurants ran higher at 33.6%. Limited-service places came in at 30.2%.
Despite that, the labour percentage can mislead you. Picture two restaurants that each spend $20,000 on labour. One makes $100,000 in sales, so its labour cost is 20%. The other makes $60,000, so its labour cost is 33%.
That’s why a high labour percentage doesn’t always mean overstaffing. Sales per labour hour gives you a clearer read on productivity. To calculate it, divide your sales by the total hours worked.
Average Restaurant Profit Margin in Canada
After food and labour, there isn’t much left. The average restaurant profit margin in Canada was 4.1% in 2024, up from 3.6% the year before, according to Statistics Canada.
On $1 million in sales, that’s about $41,000. Full-service restaurants made 3.9%, and limited-service places made 3.7%. Drinking places did best at 5.1%.
With margins this thin, small changes matter. One point of food cost on that same $1 million is $10,000, or nearly a quarter of your profit. Plus, Restaurants Canada reported that 44% of Canadian restaurants were losing money or breaking even in November 2025, up from 12% in 2019.
What Causes Restaurant Food Costs to Increase?
When food cost climbs, it’s rarely down to one thing. These are the usual culprits:
- Supplier price increases. Food inflation pushes ingredient costs up, and your margin shrinks when menu prices stay put.
- Outdated recipe costs. Dishes priced on old ingredient costs can lose money on every plate.
- Over-portioning. Small differences at service add up quickly across covers.
- Waste and spoilage. Food waste can account for 4% to 10% of purchased food in Canadian foodservice, and poor rotation and over-prepping drive much of it.
- Unrecorded comps and staff meals. Food leaves the kitchen without showing up in sales.
- Theft and inventory errors. Both make usage look higher than it should be.
- Low-margin delivery orders. Commissions of 20% to 30% on delivery apps can squeeze profit even when food cost looks fine on paper.
How to Reduce Food Costs and Protect Profit Margins
Small habits, done consistently, protect your margin better than any single big move. Let’s take a look.
Cost Every Recipe and Review Menu Pricing
Start by costing every recipe in full, garnishes and sides included. Then update those costs regularly, since ingredient prices can change quickly and quietly eat into your margin. Once you know what a plate costs, you can price it from your target food cost percentage.
Divide the ingredient cost by your target percentage. A dish that costs $5.00 to make with a 30% target needs a minimum price of $16.67. Treat that as a floor. Your market and competition still shape the final price.
Reduce Food Waste and Improve Inventory Management
Start by tracking what gets thrown out, from spoiled stock to returned plates. Rotating stock on a first-in, first-out (FIFO) basis keeps older items from expiring. Then count inventory weekly.
A full count takes time, so start with your top 20 to 30 items by dollar value and count everything else monthly. Check every delivery against its invoice as well, since short shipments and substitutions raise your costs without warning.
Standardize Portion Sizes
Write a standard recipe for every dish, with exact quantities and a photo of the finished plate. Train your team on it and give them measuring tools. Consistent plates make costs predictable, so your theoretical food cost becomes far easier to hit.
Lower Your Purchasing Costs Through a Buying Group
Tight recipes only go so far if you’re overpaying for ingredients. Start by comparing quotes from several suppliers and reviewing your contracts each year.
Then consider a buying group, which pools purchasing volume across many operators. That gives independent restaurants supplier pricing and rebates they’d struggle to negotiate alone. In most cases, you can keep buying the products you already use.
How Groupex Helps Canadian Operators Hit Their Food Cost Targets
You can cost every recipe and count every delivery, but supplier pricing still sets your starting point.
Groupex helps with that side of the problem. We’re a Canadian foodservice buying group that pools the purchasing power of more than 5,000 members. That gives independent operators access to pricing they’d struggle to negotiate alone.
Here’s how it works: You keep buying the products you already use. Rebates on eligible purchases come back to you as a cheque every month, along with a detailed statement. Groupex rebates cover more than 35,000 products from over 300 supplier partners.
Why does that matter for food cost, you ask? Rebates on items you already order lower what you effectively pay for ingredients. Since food cost percentage is ingredient cost divided by food sales, that brings your number down without changing a single recipe.
Eligible Canadian foodservice businesses can join with no contracts. Your local consultant starts with a free, fact-based cost analysis, so you can see how much you could save. From there, you choose the suppliers and categories that suit your business.
Ready to see what your purchasing could look like? Connect with a Groupex consultant today for a free cost analysis. Alternatively, you could call 1-800-670-6800.
Frequently Asked Questions
What Is the Difference Between Food Cost and Prime Cost?
Food cost covers only the ingredients you use, shown as a percentage of food sales. Prime cost adds your total labour cost to your food and beverage cost, then divides by total sales. Most operators aim for 55% to 65%.
How Often Should You Calculate Food Cost?
Weekly is ideal, since a monthly number arrives too late to act on. If a full count takes too long, count your top 20 to 30 items by dollar value each week. Then do a full count monthly.
Is a 40% Food Cost Too High?
Often, yes. Anything above 35% for more than a few weeks usually points to waste or pricing that hasn’t kept up with supplier costs. Fine dining is the main exception, where food cost can reach 33% to 40% because menu prices absorb premium ingredients.
