Purchase price and cost price aren't the same thing. Many restaurant owners confuse these terms and miscalculate their margins, losing money on every dish without realizing it.
Purchase price and cost price aren't the same thing – and this confusion kills restaurant profits. Most operators calculate food costs using invoice prices, not the real cost of getting food to the plate. That gap can drain thousands from your bottom line every month.
What is purchase price?
Purchase price is what you pay your supplier. Pure and simple.
- Beef steak: €24.00 per kilo
- Salmon: €18.00 per kilo
- Butter: €12.00 per kilo
This shows up on your invoice. This gets charged to your account.
What is cost price?
Cost price reflects what you actually spend to put food on a customer's plate. Multiple factors beyond the purchase price affect this number.
💡 Example:
You buy whole salmon for €18.00/kg. After filleting you have 55% left (45% cutting loss).
- Purchase price: €18.00/kg
- Actual cost price fillet: €18.00 / 0.55 = €32.73/kg
The difference: €14.73 per kilo!
What's included in the cost price?
Cost price includes several components:
- Purchase price: what shows on the invoice
- Cutting loss: what gets thrown away (skin, bones, peels)
- Spoilage: products that expire
- Shrinkage: moisture that evaporates during cooking
- Prep waste: what kitchen staff discards during preparation
⚠️ Watch out:
Many operators only calculate with purchase prices. This makes their food cost look lower than reality. You're bleeding money without knowing it.
Why this difference matters so much
If you only calculate with purchase prices, you'll make expensive mistakes in your pricing strategy.
💡 Beef steak example:
You want 30% food cost. You sell a beef steak of 250 grams for €32.00 incl. VAT.
- Selling price excl. VAT: €29.36
- Maximum ingredient costs: €8.81
- Beef steak (250g): meat alone €6.00
- Side dishes, sauce, garnish: €4.50
Total cost price: €10.50 → food cost 35.8%
You thought 30%, but it's almost 36%. Per beef steak you lose €1.69 in margin. This represents one of the most common blind spots in kitchen management – the gap between theoretical and actual food costs.
How do you calculate the actual cost price?
For each ingredient you apply this formula:
Actual cost price = Purchase price / (Yield % / 100)
Where yield equals 100% minus all losses.
💡 Potatoes example:
- Purchase price: €2.50/kg
- Peeling loss: 15%
- Spoilage: 5%
- Total loss: 20%
- Yield: 80%
Actual cost price: €2.50 / 0.80 = €3.13/kg
Typical losses per product
Here are standard percentages to get you started:
- Fish (whole to fillet): 40-55% loss
- Meat (boning): 15-25% loss
- Vegetables (peeling): 15-25% loss
- Shrimp (peeling): 35-50% loss
- Fruit (pits, skin): 20-40% loss
These serve as guidelines. Measure your actual losses for precision.
In practice
The difference between purchase price and cost price can be massive. With fish and meat often 50-80% higher than the purchase price. With vegetables 20-30%.
If you don't factor this into your menu prices, you lose money on every dish. At 100 covers per day that quickly adds up to thousands of euros annually.
Food cost management tools automatically calculate your actual cost prices, including all losses. This way you immediately see what each dish truly costs.
How do you calculate the actual cost price? (step by step)
Measure your losses per ingredient
Weigh products before and after processing. Calculate the loss percentage. Do this a few times to get an average.
Calculate the yield
Yield = 100% minus all losses. At 25% loss your yield is 75%.
Divide purchase price by yield
Actual cost price = purchase price / (yield / 100). At €10/kg and 75% yield: €10 / 0.75 = €13.33/kg.
✨ Pro tip
Track your actual vs. theoretical yields for 3 weeks on your top 5 proteins. Most kitchens discover they're losing 8-12% more than they calculated, which translates to real money.
Calculate this yourself?
In the KitchenNmbrs app you can do this in just a few clicks. 7 days free, no credit card.
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Frequently asked questions
Do I need to calculate the loss for each ingredient?
Start with your most expensive ingredients. Meat, fish and premium vegetables make the biggest difference. For inexpensive products you can use standard percentages.
How often should I update my cost prices?
Check your main ingredients monthly. Suppliers regularly adjust prices, and if you don't factor this in, you earn less without knowing it.
Can't I just add a 20% markup to the purchase price?
That's inaccurate and expensive. With fish at 50% loss, a 20% markup is far too little. With spices at 5% loss, it's excessive. Actually measure your yields.
What if my cost price turns out too high?
Then you have three options: raise your selling price, reduce your portions, or source cheaper ingredients. Ignoring it isn't an option if you want to stay profitable.
Should I include prep time in my ingredient cost price?
No, labor costs belong in your operating expenses, not ingredient costs. Keep them separate for clearer analysis.
How do I handle seasonal price fluctuations?
Review and adjust your cost prices quarterly for seasonal ingredients. Create price alerts with your suppliers so you know immediately about major changes. Some operators build a 5-10% buffer into their calculations for volatile items like seafood.
📚 Sources consulted
- EU Verordening 852/2004 — Levensmiddelenhygiëne (2004) — Official source
- EU Verordening 853/2004 — Hygiënevoorschriften voor levensmiddelen van dierlijke oorsprong (2004) — Official source
- EU Verordening 1169/2011 — Voedselinformatie aan consumenten (2011) — Official source
- NVWA — Hygiënecode voor de horeca (2024) — Official source
- NVWA — Allergenen in voedsel (2024) — Official source
- Codex Alimentarius — International Food Standards (2024) — Official source
- FSA — Safer food, better business (HACCP) (2024) — Official source
- BVL — Lebensmittelhygiene (HACCP) (2024) — Official source
- Warenwetbesluit Bereiding en behandeling van levensmiddelen (2024) — Official source
- WHO — Foodborne diseases estimates (2024) — Official source
Food Standards Agency (FSA) — https://www.food.gov.uk
The HACCP standards shown in this application are for informational purposes only. KitchenNmbrs does not guarantee that displayed values are current or complete. Always consult the FSA or your local authority for the latest regulations.
Written by
Jeffrey Smit
Founder & CEO of KitchenNmbrs
Jeffrey Smit built KitchenNmbrs from 8 years of hands-on experience as kitchen manager at 1NUL8 Group in Rotterdam. His mission: give every restaurant owner control over food cost.
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