How to Cost a Menu

We often get asked the same question, how do you cost a menu? What should the GP% be and what should we look out for ??

Well we have dropped a template in here but let me show you how it works. Recipe Cost Calculator –

How to calculate food cost for a recipe

• 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

Read our article on Menu development

Food cost calculations – how to calculate food cost per meal

Simply take the cost of the food and divide it by the percentage food cost you wish to achieve, multiply by 100 to find the selling price and add the VAT.

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.

RELATED ARTICLE- How can a Restaurant consultant help your business?

What is Gross profit %

Gross profit is the amount left after the cost of ingredients is removed.

How to calculate my Gross Profit –

Calculating Gross Profit % over a month?

As before allowances need to be made for any variances in your stock levels. Cost of goods, divided by net revenue x 100 will give you the % figure. Depending on your costings a healthy return looks like 70 to 75% gp.

VAT/TAX

In the UK, the Government put a tax called VAT on to the selling price of any food dish.

This % is not fixed but varies with the Government of the day, currently it is set at 20%. This % needs to be added to your menu prices.

Different countries have different TAX rates and calculations should be carried out using the appropriate level of tax, possibly even none. In some countries the TAX is ONLY added on when guests are presented with the bill/check, therefore the TAX rate is not include in the selling price.

At its current rate of 20%, to remove VAT from an item divide by 1.2. To add VAT x 1.2. Should this rate change, the calculation must change. For example, if the TAX rate is 15%,

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