Adding a new dish costs more than just the ingredients. You need to purchase extra inventory, and that ties up capital and brings risks with it. Here you'll learn step by step how to calculate what those extra inventory costs really are.
What exactly are inventory costs?
Inventory costs consist of three components that many entrepreneurs forget to factor in:
- Capital costs: The money tied up in inventory can't be invested elsewhere
- Storage costs: Extra refrigeration space, energy, insurance
- Risk costs: Spoilage, theft, depreciation
These costs often add up to 15-25% of your inventory value per year. That means €1000 in extra inventory costs you €150-250 annually.
💡 Example:
You add a new truffle pasta dish. For one week of inventory you need:
- Truffle oil: €45
- Parmesan (extra): €25
- Specialty pasta: €18
- Fresh herbs: €12
Total extra inventory: €100
The inventory costs formula
To calculate the annual costs, use this formula:
Annual inventory costs = Average inventory value × Inventory cost percentage
The inventory cost percentage depends on your situation:
- Fresh products (meat, fish, vegetables): 20-30%
- Shelf-stable products (pasta, rice, canned goods): 12-18%
- Frozen products: 15-22%
- Alcoholic beverages: 8-15%
⚠️ Note:
Always calculate with your average inventory value, not your maximum inventory. Your inventory fluctuates between deliveries.
Calculate the impact on your profit margin
You need to factor the extra inventory costs into your cost price. Many restaurants forget this and only think about the ingredient costs themselves.
💡 Example calculation:
New dish with €100 extra inventory (fresh products):
- Inventory costs: €100 × 25% = €25 per year
- You sell 200 portions per year
- Extra costs per portion: €25 ÷ 200 = €0.13
This seems small, but with 10 new dishes it adds up to €1.30 per portion extra.
Seasonal products cost more
Products that aren't available year-round bring extra risks:
- Price fluctuations due to season
- Higher minimum purchase quantities
- More risk of spoilage due to uncertainty
- Need to keep alternatives on hand
For seasonal products, you calculate with 25-35% inventory costs instead of the standard 15-25%.
How KitchenNmbrs helps with inventory planning
With a system like KitchenNmbrs you can track how much inventory each dish really needs. You immediately see which new dishes bring the most inventory costs with them, so you can factor this into your pricing.
How do you calculate extra inventory costs? (step by step)
Inventory all new ingredients
Make a list of all ingredients you need to purchase for the new dish. Also add up the extra quantities of ingredients you already have, but need more inventory of.
Calculate your average inventory value
Determine how much of each ingredient you have in average inventory. This is usually half of your order quantity plus a safety stock of 20-30%.
Apply the correct cost percentage
Multiply your inventory value by 15-25% for shelf-stable products, or 20-30% for fresh products. Divide this by the number of portions you expect to sell per year.
✨ Pro tip
Test new dishes first as a special before you add them permanently to the menu. That way you can measure the real inventory costs without large investments.
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
Should I include inventory costs in my food cost calculation?
Yes, inventory costs are a hidden cost item that affects your profit margin. Include them as part of your total cost price, on top of your ingredient costs.
What if I remove the new dish from the menu after a month?
Then you have leftover inventory that you need to write off or use in other dishes. That's why it's smart to test new dishes first with small quantities.
Are inventory costs the same for all restaurants?
No, they depend on your type of cuisine, storage options, and turnover speed. Fine dining with fresh products has higher inventory costs than a pizzeria.
How often should I recalculate my inventory costs?
Check this quarterly, or when your supplier prices change significantly. Your inventory costs rise with inflation and energy prices.
Can I lower inventory costs by ordering more frequently?
Yes, but then your ordering costs increase and you risk supply shortages. Find the balance between inventory costs and delivery reliability.
📚 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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