COGS (cost of goods sold)
Also called: cost of goods sold · cost of sales
COGS is the cost of the inventory a restaurant actually consumed during a period — not what it bought. It equals opening inventory plus purchases minus closing inventory. Using purchases alone overstates cost in a stocking-up week and understates it in a drawdown week.
Formula
COGS = Opening inventory + Purchases − Closing inventory
Worked example · March, a single-unit café
- Inventory on hand, Mar 1
- $8,400
- Purchases during March
- $31,600
- Inventory on hand, Mar 31
- $7,900
- Food sales, March
- $104,000
- COGS / food cost
- $32,100 · 30.9%
Read purchases alone and you would report $31,600 — a 30.4% food cost. The half-point difference is the $500 of inventory that came off the shelf.
What belongs in COGS
- Food and non-alcoholic beverage inventory consumed
- Alcohol, tracked as its own COGS line so pour cost stays visible
- Paper and packaging that goes out with the order, if you're counting it as cost of sales rather than a supply expense — pick one treatment and never switch mid-year
What does not belong: cleaning supplies, smallwares, kitchen labor, or delivery-platform commission. Third-party commission is a sales-channel cost, not a cost of goods — see third-party commission.
How often do I need a physical count?
Weekly if you can, monthly at minimum. A count you can complete in 45 minutes every week beats a perfect count you do twice a year — see weekly inventory.
Do I need to count everything?
Count everything expensive and everything that moves fast — proteins, seafood, dairy, alcohol. A tub of salt does not change the answer. Most kitchens get 95% of the accuracy from about 20% of the SKUs.
The guide that works it through
The Restaurant P&L, Line by Line (For Owner-Operators)
A full restaurant profit and loss statement explained line by line, with a worked example, healthy percentage ranges, and the four lines where problems actually show up first.
Related terms
Food cost percentage
The share of a dish's menu price consumed by the ingredients on the plate.
Prime cost
Total cost of goods sold plus total labor cost — the two numbers that decide whether a restaurant survives.
Inventory turnover
How many times you sell through your average inventory in a period — a direct measure of how much cash is sitting on shelves.
Variance
The dollar gap between theoretical and actual food cost — the money that left without a sale.
Pour cost
Food cost percentage for the bar — beverage cost divided by beverage sales.