First In, First Out: What Is It?

The FIFO method is used by restaurants and other foodservice businesses to correctly store food and maintain inventory, which is critical for two reasons: food safety and food costs. Having a supply of fresh food on hand can help prevent foodborne illnesses, protect a restaurant's reputation, and limit continuous food costs. On average, restaurants spend 20 to 40 percent of their revenue on food,¹ but calculating food costs can be difficult, especially if inventory isn't up to date or organized. Below, we'll explain how to adhere to "first in, first out" principles in your foodservice operation.

What is FIFO?

First in, first out (FIFO) is a finance industry term that has been adopted by foodservice professionals to describe the process of limiting expired and spoiled perishables in commercial freezers, refrigerators, and dry storage. This method ensures chefs and kitchen staff are using the oldest ingredients first, which helps prevent food waste and food safety hazards by ensuring items are used prior to their expiration dates. FIFO can be easily implemented into restaurant kitchens because it systematically follows the natural utilization of food in storage.²

Implementing FIFO Food Safety

To follow the FIFO method, operators should label new inventory with the date it arrives and its expiration date. Then, it should be placed behind the oldest ingredients to ensure the oldest items are grabbed and used first. Encourage kitchen staff to use ingredients that were purchased first to assure food inventory stays up to date and food waste is limited since you won't have to replace expired food as often.

FIFO Pros and Cons

Is the FIFO Method Right for You?

FIFO is the best method for most foodservice operations to implement, though there are two other options: LIFO and WAC. LIFO – or last in, first out – implies ingredients that were purchased last are the first ones used. This method is not ideal, as it results in many ingredients spoiling before use, which can dramatically increase food costs. The weighted average cost (WAC) method takes the average cost of all stored goods and combines them. While WAC is simple to calculate, it assumes every ingredient in storage is the same, and it doesn't account for the shelf life of ingredients.

For restaurants with consistently high traffic, adding the FIFO method to the kitchen's workflow may be more difficult, but having an inventory management system that integrates with the POS can help maintain this method.³ Food costs also fluctuate all the time, so the price paid for some ingredients may be different when they are repurchased, which can result in inconsistent costs and revenue.

References

1. How to Calculate Food Cost Percentage with a Food Cost Formula. TouchBistro. Accessed November 2022.
2. Which Inventory Costing Method Is Right for Your Restaurant? Toast. Accessed November 2022.
3. FIFO Vs. LIFO Vs. WAC: What Restaurant Inventory Costing Method is Best? Sculpture Hospitality. Accessed November 2022.