Stat Sheet: COGS-to-Revenue Ratio for Restaurants (Sep 2024)

What is the Ideal COGS-to-Revenue Ratio for a Restaurant?

While there is no formal research on the ideal ratio, we can still look at actual U.S. restaurant practice for the past few years.

According to the National Restaurant Association, in 2019 Food & Beverage costs were around 33% on average for all U.S. restaurants.

However, the 2022 State of the Industry report and a 2022 survey shows that this number jumped to 40.2% spend on COGS in 2022.

In 2024, 76% of restaurant owners reported even higher food costs compared to 2022. This means on average at least 40 cents of every dollar earned goes back to food costs in 2024.

Sources: National Restaurant Association [2024 SOTI, 2022 SOTI, 2022 Survey]

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What Causes Changes to COGS?

COGS Changes Over Time

One way to understand this uptick in the COGS ratio is to look at the Producer Price Index (PPI).

The PPI tracks the average change over time in prices that producers (like farmers and food manufacturers) charge for their goods. Changes in the PPI can give early signs of whether all downstream food costs are going up or down.

Here’s how the PPI has been steadily changing over the past decade (annual averages):

Sources: Federal Reserve Economic Data, Bureau of Labor Statistics

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COGS by Commodity

Trends in the cost of raw commodities can also explain these changes.

Between 2018-2020, when COGS were around 33% of Revenue, price changes were mostly small. Beef and veal went up by only 1.7% to 2.0% each year and pork saw a big rise to 14% in 2020. Other food items like eggs had huge swings, with prices jumping 33.2% in 2018 but then dropping 34% in 2019.

In 2023-2024, however, food prices rose more dramatically. Beef and veal prices went up by 4.5%; farm-level eggs jumped by 90.7%. Despite some drops, like for fish and seafood, most food categories saw bigger price increases than in the earlier period.

This means that the cost of food was generally higher in 2023-2024 compared to 2018-2020.

Here’s how raw food costs have changed over time:

Sources: U.S. Department of Agriculture

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Cost of Goods 2025-2033 Projections

According to the U.S. Department of Agriculture, some foods are expected to get more expensive, like milk (19.5%) and eggs (16.6%). Beef and pork prices are predicted to drop a lot, with beef going down by 21.2% and pork by 20%.

The prices of crops like corn, rice, and wheat are also expected to decrease, but not so dramatically.

These changes are happening after prices were very high in 2021 and 2022 due to strong demand and problems with production.

Here is a chart of projected changes between the period 2025-2033:

Sources: U.S. Department of Agriculture

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Restaurant Sales

Restaurant revenue has increased over time, despite changing costs.

Here’s how restaurant sales revenue has changed since 2019 (all figures in billions of dollars):

Sources: National Restaurant Association, Fortune Business Insights

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How do restaurants respond to changing COGS?

There are a few ways restaurants have recently respond to these changing cost of goods.

In 2024, 60% of operators shopped around for other suppliers or took items off the menu (53%).

Here is a breakdown of how restaurant operators have responded:

Sources: National Restaurant Association

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Conclusion

The COGS-to-revenue ratio is crucial for any restaurant’s success.

While restaurant sales are up, so are costs. On average restaurants in 2024 hold above a 40% COGS-to-Revenue ratio. This number is up from the commonly recommended ~30%.

Though some food costs like beef and pork will see decreases, other product categories will continue to see their farm prices steadily increase, or only marginally decrease, through 2023. This means restaurant operators should look to aggressively cut costs in other areas (like labor and overhead) to maintain profitability.