How to Cost a Menu

A restaurant menu, indeed each menu item, is written and costed inclusive of any food waste, so we always make an allowance for this

• The the total of the individual ingredients gives up the COST PRICE. The price you sell the dish at is the SELLING PRICE, which will have VAT included (currently set at 20% in the UK)

• To find the true selling price the VAT must be removed.

• Margins are variable depending on your business model but anything between 20 to 30% is normal

• Balance high cost items such as steaks and lobster with low cost items such as side dishes and vegetarian items to achieve an overall better blended margin

What is Food Cost?

The actual food cost % is then calculated by dividing the COST PRICE by the SELLING PRICE and multiplying by 100 as in the equation above.

Example:

Assume the Cost Price is £2.00 and the Selling Price is £12.00

To remove the tax (20%) from the selling price, divide by 1.2 * (see notes on VAT below)

So the Selling Price (less VAT) = £10.00

Calculating Food Cost Percentage on a Monthly Basis, Rolling Food cost

Food costs on a monthly or even weekly basis is also useful.  Total food cost is the sum of all food purchases from suppliers less any returns / credits you are owed.

Total food revenue is the total food sales over any given period, less the VAT.

Dependent on the size of your business perhaps a recipe calculator or inventory software is worth some investment.