COGS
COGS stands for Cost of Goods Sold. In a restaurant, it refers to the direct cost of all ingredients and beverages that went into the items you actually sold during a given period. It does not include labor, rent, or other overhead. It is strictly what you spent on the food and drinks that left your kitchen and bar and reached a guest's table.
Why it matters for your restaurant
COGS is the starting point for understanding whether your menu pricing is working. If your COGS is too high relative to revenue, your menu prices are too low, your portions are too large, or you are experiencing waste and spoilage. If it is in a healthy range, you have room to cover labor and overhead while still turning a profit.
For most full-service restaurants, COGS should land between 28% and 35% of total revenue. A bar-heavy concept might see lower food COGS but needs to factor in beverage COGS separately. A steakhouse or seafood-focused restaurant often runs higher because of premium ingredient costs.
Tracking COGS consistently, ideally weekly, gives you an early warning system. If the number starts climbing, you can investigate immediately rather than discovering a problem at the end of the month when the damage is already done.
How it works in practice
The standard formula is: beginning inventory plus purchases minus ending inventory equals COGS. If you started the week with $5,000 in food inventory, bought $8,000 in supplies, and ended the week with $4,500 in inventory, your COGS for that week is $8,500.
If your revenue for that same week was $28,000, your COGS percentage is $8,500 divided by $28,000, or about 30.4%. That is a reasonable number for most restaurant types.
Where it gets interesting is comparing COGS to your theoretical food cost. Your recipes and portion specs might say you should have spent $7,800 to generate that revenue. The $700 gap between theoretical and actual COGS represents waste, over-portioning, theft, or unrecorded comps. Closing that gap is one of the fastest ways to improve profitability.
Connecting the dots
COGS is closely related to food cost and food cost percentage, and all three terms are sometimes used interchangeably in casual conversation. The important thing is to track this number consistently, compare it to benchmarks, and investigate when it moves in the wrong direction. It is the foundation for pricing decisions, inventory management, and overall profitability.