What does the term 'food costs' refer to?

The term 'food costs' specifically refers to the total expenses incurred in purchasing food ingredients. This encompasses all the costs associated with acquiring the raw materials necessary for food preparation, such as fruits, vegetables, meats, dairy products, and other items used in creating menu offerings. Understanding food costs is crucial for maintaining budgetary control in any food service operation, as it directly impacts profitability.

Monitoring these costs allows establishments to manage pricing strategies, portion sizes, and waste efficiently. Calculating food costs helps ensure that the business remains financially viable while also delivering quality food offerings to customers. This metric is a key component in the overall cost structure of the hospitality industry, forming the basis for effective menu planning and cost analysis.