Guide, 2026-11-04

How to calculate food cost percentage and price a menu item

Food cost percentage is the share of a dish's selling price that goes on ingredients. It is the number most cafes, restaurants and caterers use to decide whether a price is right. Calculating it properly takes one extra step that many people skip, and that step is usually why the menu earns less than expected.

The formula

Food cost % = cost per portion ÷ menu price (excluding tax)

If you charge tax on top of a printed price that includes it, remove the tax first. A $12.00 menu price that includes 20% tax is $12.00 ÷ 1.2 = $10.00 before tax. That $10.00 is what you divide by.

Step 1: cost each ingredient per usable unit

You buy a kilo of chicken but you do not serve a kilo. Trimming, peeling and cooking loss mean only part of it reaches the plate. That share is the yield. The true cost is:

cost per usable unit = pack price ÷ (pack size × yield %)

Chicken at $9.00 per kilo with a 75% yield really costs $9.00 ÷ 0.75 = $12.00 per usable kilo. Ignoring yield would understate that ingredient by a quarter.

To find your own yield, weigh a batch as delivered, prepare or cook it as you normally would, and weigh what is left. Repeat a few times and use the average.

Step 2: build the recipe

List every ingredient in one portion with the quantity used, multiply by its cost per usable unit and add them up. Include the small things: oil, garnish, sauce, the bread on the side. For something made in batches, such as a dressing, cost the batch once and treat it as an ingredient with its own cost per portion.

A worked example

A cafe costs its chicken salad bowl:

The bowl sells for $10.00 before tax, so food cost is $3.20 ÷ $10.00 = 32%. Gross profit per portion is $10.00 - $3.20 = $6.80.

Step 3: find the price that hits your target

Turn the formula around:

price at target = cost per portion ÷ target food cost %

With a 30% target, the bowl would need to sell for $3.20 ÷ 0.30 = $10.67 before tax. You might round that to a price that suits your menu, or change the recipe instead, for example a smaller portion of the most expensive ingredient. There is no single right target. It depends on your type of business, your other costs and your local market, so set it from your own numbers.

Step 4: menu engineering

Food cost % alone can mislead. A dish with a high percentage can still earn the most money per plate. Menu engineering looks at two things for each item over the same period: popularity (how many sold) and profitability (gross profit per portion). One widely used convention treats an item as popular if it sells at least 70% of an equal share of the total, and as profitable if its gross profit is above the sales-weighted average.

Total sold is 920, so an equal share is 230 and the popularity threshold is 70% of that, 161. Total gross profit is $5,629, and $5,629 ÷ 920 gives a weighted average of about $6.12 per item. Stars you protect. Plowhorses might take a small price rise or a cheaper garnish. Puzzles need better placement or a staff recommendation. Dogs are candidates to rework or remove.

Common mistakes

• Ignoring yield, which makes high-waste ingredients look cheap.
• Dividing by a price that still includes tax.
• Costing a recipe once and never updating supplier prices.
• Leaving out sauces, garnishes and sides.
• Reading food cost as total cost. Labour, rent and energy are separate and need their own budget.

When a ready-made workbook saves time

For three dishes, a sheet like the one above is quick. For a full menu with shared ingredients and changing prices, linking every recipe to one ingredient list is where the work is. MenuCost does that: ingredients with pack sizes and yield, cost per portion, food cost % against your target, price at target, gross profit and a menu engineering class for each item, plus a dashboard. It covers food cost only, not labour or overheads.