How to Calculate Recipe Food Cost: Restaurant Menu Costing Guide

Understanding the true cost of your menu items allows you to formulate a profit margin that is perfect for your restaurant. When you know the overall cost, you can follow food pricing guidelines to ensure that every dish provides you with a profit.

But calculating menu costs requires to consider everything, from the ingredients to how long the item takes to prep and cook. Restaurant food costing, also called plate costing, sounds simple. But you have to go beyond the basics to find the actual costs of each item.

How Do You Calculate Recipe Costs

You can start with four simple steps:

1. Write down all of the ingredients in a recipe.
2. Determine the cost of each ingredient in total (whether it be a 10lb bag or not).
3. List how many grams of each ingredient you have in a recipe.
4. Divide the total cost of the ingredient by the grams of each ingredient.

But this is just the cost of the actual meal.

The ideal food cost is between 28% and 35% of the menu price. So, for easy calculation, let’s say that a dish costs $2.8 to create. You’re just counting ingredients here, but we can easily determine that the menu price needs to be $10 at a minimum.

The ingredients ($2.8) cost just 28% of the menu price, and the remaining costs goes to your overhead:

• Server costs
• Utility costs
• Cook costs

Food cost calculation is just part of the process because you have a lot of costs in a restaurant.

Handling Price Fluctuations

When costs come down, they go in your favor because profit margins rise. If costs rise, they’ll eat away at your profitability. It’s important to keep food costs closer to 28% of the menu price to allow for a 7% fluctuation in prices.

It doesn’t make sense to adjust your menu pricing weekly due to fluctuating costs, but when costs are too high, you may want to:

• Remove certain items from the menu
• Adjust prices
• Temporarily remove items from a menu

Another tip is to work with a food supplier that can lock in costs for a specific period of time. For example, the supplier may guarantee prices for a 30-day period. If beef prices rise, you may be able to substitute your high-end ingredient for another ingredient to alleviate issues with overhead.

It’s important to stay on top of your ingredient costs to ensure that a menu item remains profitable.

Weekly or monthly pricing checks and additions to your database can help you take preemptive measures if the cost per plate rises above the 35% margin — or a level that’s acceptable for your profitability.

How to Grow Profit & Keep Items on the Menu

You’ve done all of your restaurant food costing, but your profit margins are starting to shrink. Ingredient prices are rising, and you can’t cut back on staff. There are a few options that you have before nixing an item from the menu.

1. Take a hard look at the portion size you’re providing. A small reduction in portion size can mean a drastic savings in ingredient costs.
2. When a certain ingredient cost rises, you may be able to substitute for a similar brand or item without impacting the taste or quality of the food. Work with suppliers to be able to find items that you can substitute if prices rise above acceptable levels.
3. Another way to increase the profits per plate is to sell alcohol. The costs are very minimal, and the profits are much higher on alcohol or wine than on many menu items. You may not be able to increase the menu price for an item, but you can increase spending totals with drinks.

Updated recipe costs keep end-of-month surprises to a minimum.

Small price adjustments will often not deter patrons from coming to a restaurant. It’s important to not surprise your patrons with a rate increase. If your menus are old and the price hasn’t been corrected, you risk losing a customer for life if you charge them more than what’s on the menu.

You may also be at risk of false advertising.

Regular guests that come in weekly and order the same thing might not even ask for a menu. Servers should alert these guests to any price increases, too.

Source: https://mcdonaldpaper.com/blog/calculate-food-cost-for-recipe