Shrinkage
By Marji · Updated · Sources and editorial policy
Shrinkage is inventory that leaves without producing revenue. It bundles waste, spoilage, over-portioning, receiving errors and theft into one number. It's closely related to variance — variance is the dollar measurement, shrinkage is the physical fact behind it.
The word carries an implication of theft that it shouldn't. Portioning, spoilage and recipe errors are cheaper to check than theft and cost no trust; investigate in that order.
Formula
Shrinkage % = (Expected inventory − Actual inventory) ÷ Expected inventory × 100
Expected inventory is opening plus received minus what your recipes say you sold.
Worked example · One high-value item, one month
- Opening inventory
- 42 lb
- Received
- 310 lb
- Recipes say sold
- 318 lb
- Expected on hand
- 34 lb
- Actually counted
- 27 lb
- Shrinkage
- 20.6% · 7 lb
Tracking shrinkage per item rather than in aggregate is what makes it actionable — a 20% gap on one protein points somewhere very specific.
| # | Check | Why first |
|---|---|---|
| 1 | Recipe accuracy | A wrong recipe makes every other number lie |
| 2 | Portioning | Cheap to measure; drift shows on every plate |
| 3 | Waste and spoilage | A two-week log answers it definitively |
| 4 | Receiving | Short deliveries and unnoticed price changes |
| 5 | Comps and staff meals | Real cost, no ticket — often simply uncounted |
| 6 | Theft | Investigate last and with evidence; investigating first costs trust |
Run the numbers
Ideal vs. actual variance calculator
The guide that works it through
Ideal vs. Actual Food Cost: Which Inputs Explain the Gap?
Compare reviewed recipe costs and manually supplied dish counts with inventory-adjusted period food cost, then check invoice, unit, portion and timing evidence.
Related terms
Variance
The dollar gap between theoretical and actual food cost — the money that left without a sale.
Spoilage
Product lost to age, temperature or damage before it could be sold.
Waste percentage
The share of purchased food that is thrown away rather than sold — spoilage, overproduction, errors and returns.
Theoretical vs. actual food cost
Theoretical is what the recipes say you should have spent; actual is what inventory says you did. The gap is the whole story.
Voids
Items removed from a check — some before the food was made, some after, and only the difference matters for cost.