Inventory, waste and food cost

Inventory is where restaurants find money they didn't know they were losing: over-portioning, unrecorded comps, spoilage and theft all show up as the gap between what you should have used and what you did. A POS can do the arithmetic, but only from data you put in. This guide covers what to set up, what to measure and how to keep it going.

How recipe-based inventory works

1. Enter recipes. Each menu item lists its ingredients and quantities: 6 oz of chicken, 1 tortilla, 1 oz of cheese.
2. Sales deduct ingredients. Every item sold reduces the expected stock of each ingredient, including modifiers ("extra cheese" deducts more cheese).
3. Count on a schedule. Count key ingredients weekly, or daily for expensive proteins, and enter the counts.
4. Compare. The difference between expected and counted stock is your variance.

Theoretical versus actual food cost

In a week, a restaurant sells $12,000 of food. Its recipes say those sales should have used $3,360 of ingredients: a theoretical food cost of 28%. Opening stock was $4,000, it received $3,500 of deliveries, and closing stock is $3,700, so it actually used $4,000 + $3,500 − $3,700 = $3,800, an actual food cost of about 31.7%. The $440 gap is what to investigate: portions, waste, comps or theft.

The useful number is the gap and how it moves week to week, not a target from someone else's restaurant.

Waste logging

• Log waste when it happens: dropped plates, spoiled produce, end-of-day prep that can't be held.
• Record a reason for each entry, so you can see whether waste is spoilage, prep errors or overproduction.
• Review waste by item each week, and adjust prep quantities.

Food waste adds up beyond any one kitchen: the EPA estimates that about 66 million tons of wasted food were generated in the food retail, food service and residential sectors in 2019. Logging your own is the first step to reducing it.

Par levels and reordering

A par level is how much of an ingredient you want on hand before each delivery. Set pars from your actual usage, with a margin for busy days, and have the POS or inventory tool flag items below par so ordering doesn't depend on someone noticing. Some systems can draft purchase orders to your suppliers.

Which plans include it

Inventory is often a higher-tier feature or an add-on. Square, for example, lists integrated inventory tracking from its Plus plan, and Clover lists cost tracking by item and stock tracking on its restaurant bundles. Checked October 1, 2026. Ask whether the plan you're quoted tracks ingredients by recipe or only counts whole items, because the second won't give you food cost.

Where to start

1. Pick your 20 best-selling items and enter their recipes carefully.
2. Count the ingredients those recipes use, weekly.
3. Log waste for those ingredients.
4. Review the variance each week for a month before adding more items.

Keeping recipes right

A recipe in the POS that doesn't match how the kitchen actually portions makes every report wrong. Update recipes when portions or suppliers change, and spot-check portions at the line. Combination plates need special care: a combo should deduct each component's actual portion, not the full portion of every item in it. The Mexican restaurant guide works through that example.

What to ask in a demo

1. Does inventory deduct by recipe, including modifiers?
2. Can I log waste with reasons from a phone or tablet in the kitchen?
3. Does it show theoretical versus actual food cost?
4. Which plan includes it, and does it cost extra?

For bars, pour cost works the same way; see the bar and nightclub guide.