Shrinkage
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. In practice theft is a minority of shrinkage in most kitchens — well behind portioning drift and spoilage. Investigating in that order is both more effective and less corrosive to a team.
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 | Largest single cause in most kitchens; cheap to measure |
| 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 | Real, but least common; investigating first costs trust |
Run the numbers
Ideal vs. actual variance calculator
The guide that works it through
Ideal vs. Actual Food Cost: Where the Variance Actually Hides
How to compute theoretical food cost from your POS mix, compare it against actual COGS, and work through the six causes of variance in the order that usually pays.
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.