Food cost and menu pricing: how to price a dish

How do you calculate food cost and the selling price of a dish?

Food cost is what the ingredients on a plate cost you. It is not the whole cost of the dish (there is also staff, rent and energy), but it is the only part you can work out precisely dish by dish. That makes it the starting point for any price in a restaurant, café, bakery or catering business.

Many owners price “by feel” or by looking at the place next door. The risk: a best-selling dish whose ingredients have gone up over the year, quietly earning less and less. An hour of maths per dish, redone when supplier prices move, is enough to prevent it.

Food cost, food cost percentage, markup, margin: what do they mean?

Four ideas are enough. Work them out on prices excluding tax: the sales tax or VAT you collect is not yours, you pass it on to the government.

Food cost percentage and markup say the same thing the other way round: 25% equals a multiplier of 4; 30% equals about 3.33.

What food cost percentage should you aim for?

There is no figure that suits everyone. The right target depends on your other costs: a restaurant with a large team or high rent needs to keep a bigger share of each price to pay for them. Set your target from your own accounts, ideally with your accountant, who can tell you what gross profit you need to cover your costs and make a profit. In this guide we use 30% purely to illustrate the maths.

What is a recipe card and how do you fill it in?

A recipe card (or costing sheet) is the “accounting” version of the recipe: every ingredient, the exact quantity, the purchase price and the number of portions. It is used to calculate cost, but also to serve the same plate whoever is cooking, and to answer customer questions about ingredients and allergens.

• weigh quantities for real at least once rather than guessing;
• use the purchase price excluding tax from your latest invoice, converted to the unit you use (kilo, litre, piece);
• count everything: garnish, sauce, cooking butter, herbs, decoration;
• note the yield of anything that loses weight (peeling, trimming, cooking);
• date the card and redo it when a supplier price changes noticeably.

A template to copy into a spreadsheet or notebook:

RECIPE CARD — [Dish name]
Business: [Business name] — Costed on: [date]
Number of portions: [10] Portion weight served: [ ] g
Ingredient | Net quantity | Yield | Gross quantity | Purchase price / unit (ex. tax) | Cost (ex. tax)
[Ingredient 1] | [ ] kg | [ ] % | [ ] kg | [ ] / kg | [ ]
[Ingredient 2] | [ ] kg | [ ] % | [ ] kg | [ ] / kg | [ ]
[Seasoning, oil, herbs] | allowance | — | — | — | [ ]
Total recipe cost (ex. tax): [ ]
Cost per portion (ex. tax): [ ]
Target food cost: [ ] % Calculated price before tax: [ ]
Sales tax / VAT rate: [ ]
Menu price chosen: [ ] Actual food cost: [ ] % Gross profit per plate: [ ]
Allergens: [ ]

How do you work out the cost per portion, including waste?

The classic trap is forgetting waste. If a recipe needs 1.8 kg of peeled potatoes and peeling loses 20%, you have to buy 2.25 kg (1.8 ÷ 0.80). That “gross” weight is what you pay for, so it is what you count.

The formula: gross quantity = net quantity ÷ yield, then cost = gross quantity × purchase price. Measure yield once: weigh the product before and after preparation, and write it down.

Worked example: chicken supreme, mashed potatoes, thyme jus

A fictional dish for 10 portions, with purchase prices made up for the example (use your own; the maths works in any currency):

Cost per portion: 41.00 ÷ 10 = 4.10 before tax.

The house jus has its own recipe card (bones, vegetables, cooking): cost one litre there, then carry the figure over. Do the same for stocks, sauces and base doughs.

How do you go from food cost to menu price?

Two equivalent ways: divide the cost by your target percentage, or multiply it by your markup. With our chicken supreme at 4.10:

At a 30% target, the maths gives 13.67. You would not print that: round it to a menu price, say 14.00 before tax, then check what it really gives you:

• actual food cost: 4.10 ÷ 14.00 = 29.3%, just under target;
• markup: 14.00 ÷ 4.10 = 3.41;
• gross profit: 14.00 − 4.10 = 9.90 per plate.

The maths does not decide on its own

The calculated price is a starting point, not an order. Test it against three questions: does it fit the rest of your menu and your area? Do customers see it as a signature dish worth a little more? If the price is too high for your customers, what can you change in the recipe (garnish, portion size, seasonal produce) rather than cutting perceived quality?

How do sales tax and VAT fit in?

Tax rules on food vary a lot from country to country, and often depend on whether food is eaten in, taken away, hot or cold. Always do your costing on prices before tax, then apply the rules where you trade.

• UK: HMRC’s VAT Notice 709/1 on catering and takeaway food says food and drink supplied in the course of catering (such as meals eaten on your premises) is standard-rated, hot takeaway food meeting certain tests is standard-rated, and cold takeaway food is generally zero-rated, with exceptions such as crisps, sweets and bottled water. Menu prices shown to consumers usually include VAT.
• EU countries: each country sets its own rates for restaurant meals, takeaway food and drinks, often with a lower rate for food and the standard rate for alcohol. In France, for example, meals served in a restaurant are taxed at 10%, bakery products sold over the counter at 5.5% and alcoholic drinks at 20%.
• US: sales tax is set by states and local areas, and menu prices are often shown before tax, which is added at the till.

How do you adapt the method to your type of business?

Restaurant and pub

Do a card for every dish and every set menu. For a three-course set menu, add up the food cost of all three plates and compare it with the menu price before tax: a set menu can carry a higher percentage than an à la carte dish, as long as the whole menu stays on target. Cost your specials too: that is often where costs slip, because they keep changing.

Bakery and patisserie

Cost by the piece or by the kilo of dough. Fictional example: an apple tart whose card gives a food cost of 0.62. With a multiplier of 4, the price before tax is 2.48; add your local tax and round. If you also have a few tables, check whether food eaten in is taxed differently. Our bakery website guide shows how to present products and prices online.

Caterer

Cost per dish and per guest, then per event. Add non-food items separately (crockery hire, delivery, staff) so they do not distort your food cost. For buffets, use the quantities per guest actually eaten at your recent events.

Bar and café

The same logic works for drinks: bottle cost ÷ number of glasses actually poured (not in theory), then price. Alcohol is often taxed at a higher rate, which changes the step from pre-tax to menu price.

Takeaway and food truck

Add packaging to every portion: box, cutlery, bag, napkin. On a small order, it weighs more than you would think.

How do you spot the dishes that earn money and the ones to rethink?

Once every dish is costed, combine two facts over a month: how many you sell (your till tells you) and how much each plate earns (gross profit). This is called menu engineering. A fictional example with four dishes, prices before tax:

Average gross profit, weighted by sales, is 10.51; with four dishes, a dish is “popular” if it makes more than a quarter of sales. Four simple decisions follow:

• star (popular, above-average profit): leave it alone and feature it;
• popular, margin to improve: rework the recipe or nudge the price up, customers love it;
• profitable but under-sold: promote it better (menu position, staff suggestion, photo, a social media post);
• rethink (low sales, low profit): change the recipe or price, or drop it.

Note the trap: the chicken has the best percentage (29.3%) but earns less per plate than the burger. Cash margin pays wages and rent, not percentages.

What about displaying prices and online menus?

Most countries have rules on showing prices to consumers before they order: what must be displayed, whether tax and service charges must be included, and sometimes where (outside the premises, for example, in France). Check the rules with your local trading standards or consumer protection authority.

A good habit everywhere: show the final price customers will pay, say clearly whether a service charge is added, and keep printed menus, your website and your QR menu in sync.

A QR menu or a menu on your website helps customers choose before they come and lets you change a price in a minute. You can create a free menu QR code. With the Voxtya Website, you import your menu as a PDF or photo and dishes and prices are picked up for you, with a QR menu for your tables.

How do you check that real food cost matches the maths?

Recipe cards give a theoretical cost. In real life there is waste, generous portions, spoiled stock and staff meals. To measure it, compare once a month:

• actual usage: opening stock + purchases − closing stock (all before tax);
• food sales before tax for the month.

Actual usage ÷ food sales = your actual food cost percentage. If it is well above the theoretical figure for your menu, look for the leak: portions not respected, waste, a sloppy stock count, supplier prices that have risen.

A new menu is also something to talk about: see our local business marketing ideas and the small business marketing calendar to time menu changes with the seasons.

What pricing mistakes should you avoid?

• Costing on prices including tax, or mixing pre-tax and tax-inclusive figures.
• Forgetting waste (peeling, trimming, cooking) and “small” ingredients (butter, oil, herbs, sauce).
• Never updating recipe cards when supplier prices move.
• Thinking only in percentages: a low food cost dish can earn less cash than another.
• Using one multiplier for everything: a dessert, a glass of wine and a steak follow different logic.
• Applying the wrong tax rate to eat-in, takeaway or alcohol.
• Copying the competitor’s prices without knowing their costs: they may be losing money.
• Letting menus drift apart: a different price on the website, the QR menu and the printed card.

The steps at a glance

The steps to go from recipe to menu price, with the right tax.

1. Write the recipe card. List every ingredient with its net quantity and the number of portions.
2. Measure yields. Weigh products before and after preparation to know the waste.
3. Cost each ingredient. Gross quantity (net ÷ yield) × purchase price before tax.
4. Work out cost per portion. Divide the total recipe cost by the number of portions.
5. Calculate the price before tax. Divide cost per portion by your target food cost percentage, or multiply by your markup.
6. Add tax and round. Apply the rules where you trade and choose a menu price.
7. Check the result. Recalculate the actual food cost percentage and the gross profit per plate.
8. Monitor monthly. Compare actual usage with food sales and update the cards.

This guide for your trade

• Restaurants
• Bakeries
• Bars
• Website for bars and cafés
• Hotels and B&Bs

Go further

• The Voxtya QR menu
• Restaurant QR menu: the complete guide
• Best QR menu apps for restaurants
• How to create a restaurant website
• Bakery website guide
• Customer retention for small businesses