COGS (Cost of Goods Sold)

What it actually means

COGS is the single biggest controllable line on a restaurant's P&L, and the input to every food cost percentage calculation. It includes ingredients consumed, sold, wasted, comped, and given away — anything that left inventory in the period. It does not include labor, rent, utilities, or supplies (those are operating expenses, not COGS). Restaurants report COGS weekly (best practice for indie operators), bi-weekly, or monthly.

Formula

COGS = Beginning Inventory + Purchases − Ending Inventory

A worked example

A pizzeria starts the week with $12,000 of inventory, purchases $9,800 in invoices, and ends the week with $10,400 of inventory. COGS = $12,000 + $9,800 − $10,400 = $11,400. If food sales for the week were $36,000, food cost percentage is 31.7%.

Why it matters for indie restaurants

If you only know one number in a restaurant, know COGS — and know it weekly, not monthly. A retroactive monthly COGS is a forensic report on margin you've already lost. Weekly COGS gives you four chances to react before quarter-end, and that's the difference between operators who control food cost and operators who explain it after the fact.

Related terms

• Food cost management — Food cost management is the operational practice of monitoring the cost of every ingredient that enters and leaves a restaurant kitchen, so menu pricing, portioning, and supplier choices stay aligned with the restaurant's target margin.