Definition
Cost of goods sold (COGS)
Cost of goods sold (COGS) is the direct cost of the food and beverage you actually sold in a period, the ingredient half of your [[term:prime-cost]].
COGS is what the product itself cost you: the food and drink you bought and turned into sales over a set window. You calculate it as beginning inventory plus purchases minus ending inventory, which is the cost of goods you truly used, not just what you ordered. Expressed against the sales it generated, that same figure is your Food cost percentage, and across the industry it runs at a median of 32.0% / 32.4% of sales.
COGS matters because it is one of the two largest controllable costs a restaurant carries, and together with labor it forms your Prime cost. It is also the number that erodes fastest when nobody is watching: suppliers raise prices between orders while menu prices lag, and with restaurant prices themselves up +4.1% in 2025, a recipe that penciled out last quarter can quietly stop doing so. Whatever is left after COGS is your Gross profit margin, the pool every other cost is paid from on a 3-5% net margin.
This is where AI earns its keep for an operator without a full-time controller. Invoice-scanning and inventory platforms (MarginEdge, Restaurant365) rebuild COGS from your actual invoices and POS daily instead of a monthly hand-count, and flag the exact item a vendor price increase just made unprofitable. Waste tracking (Winnow) recovers the share of COGS you paid for and threw away, cutting food cost by 2-8% food-cost savings. See inventory and food cost.
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