Calculating Food Cost For A Recipe

Ideal Menu Item Price Formula

The ideal menu item price formula finds a price for your company that helps keep your food cost ratio low. To find the ideal menu item price, divide the cost of your servings by your food cost percentage goal. This number will help you determine how much you need to charge per menu item to create an accurate and valuable menu for both you and the customer. You may need to lower or raise your prices depending on the result.

How To Calculate The Food Cost For A Recipe

Do you remember that really cool recipe you saw on tv the other day? Well, it could be a lot more expensive than you think. Its important to calculate the total cost of the food youre making before you get to the grocery store.

You may have recently found a really great recipe. Maybe it was while flipping through the pages of a magazine or maybe it was on the food channel, or possibly, it was your mother-in-law. Whatever the case is, youll need to know whether its worth it or not before you start shopping.

The colorful descriptions of how the meal looks and tastes dont say anything about all of the associated costs. With this in mind, lets take a look at some of the total costs that you need to calculate.

Use Package Labels To Calculate Partial Ingredient Costs

For most ingredients youll need to use the information listed on the ingredient packages to determine the cost of the amount used in the recipe. Here are some examples:

This recipe used 1/2 lb. of penne pasta. The whole box cost $1.49. Since I used half the box, the cost of the amount used is $1.49 ÷ 2 = $0.75.

The same method was used for this bag of spinach. The full 8 oz. bag cost $1.29, so the cost of the 4 oz. used is $1.29 ÷ 2 = $0.65.

Sometimes the manufacturers are nice and provide helpful guides for measuring. This full 8 oz. package of cream cheese cost $0.79, so the cost of the 2 oz. used in the recipe is $0.79 ÷ 4 = $0.20.

Sometimes the calculations can get a little more involved. The cost of this 6 oz. can of tomato paste was $0.39. We can see on the nutrition label that there are 5 servings of 2 Tbsp in the can, or a total of 10 Tbsp per can. We used 2 Tbsp for the recipe, so the cost of what we used is $0.39 ÷ 5 = $0.08.

I bought this bottle of olive oil a while back, so I had to refer to Kroger.com to get the price. The total price for this bottle was $5.95. We can see on the nutrition label that there are 66 servings of 1 Tbsp in the whole bottle. We used 1 Tbsp for the recipe, so the cost of what we used is $5.95 ÷ 66 = $0.09.

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Boosting Profitability Without Changing Your Menu

What if you price your menu items properly, but your margins are still shrinking? Many restaurants may face this problem in 2023, as food prices and overhead costs may be unpredictable.

Many restaurants are short-staffed as-is, so cutting staff may not be an option. What can you do to stay in business?

Here are some ways to maintain or even boost profitability without changing your menu:

• Consider ingredient substitutions. Substituting ingredients can help you cut back on costs, but make sure that you do this carefully. You may find a similar brand or item that will reduce the cost of the dish without impacting the quality or taste.
• Reduce your portion sizes. Are most of your guests taking home large portions of their meals home? If so, your portions may be bigger than necessary. Reducing portions will help stretch your ingredients and save on costs.
• Train your staff to recommend menu items with higher profit margins.
• Increase prices gradually over time. A small increase in costs wont deter guests, but a big one may turn even your most loyal customers away.

How Consistent Portioning Helps To Improve Your Food Cost Per Plate

There can be a million reasons for high food costs per plate in your restaurant. To find them out, you can start by checking the most common issues and establish control points for your food cost one by one. We suggest you pay attention to your portion sizes, freebies and garnishing from the start.

Consistent portioning is important for keeping your business profitable. The slightest over-portioning of expensive products will drive the cost up immediately. To make menu items consistent across shifts:

• Define the standard portion size and set your selling price.

• In specifications, break dishes down on ingredients taking into account the portioning tools used at prep stations: one cup, two tablespoons, three sticks, etc.

• Equip the prep stations with scales, scoops, ladles, measuring cups and serving spoons and train your staff to always use the correct utensils, dishes, measuring and slicing equipment.

• Control the number of freebies, like toasts, breadcrumbs, or sauce, that you serve with the dishes.

• Reconsider your approach to garnishing every season to avoid overspending on the small decorative elements that your chef adds to dishes dish to make them look more appealing.

• Assign a responsible for watching portion sizes and plating for every item coming out of the kitchen.

• Ask waiters or bussers to measure and record what comes back from the table and report the dishes for which the portions might be too large.

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Why Is Recipe Costing Important

The primary reasons that make recipe costing extremely important are:

• Recipe costing helps you know how much food cost is incurred to prepare a dish. This gives you a clear view of how much you can earn per dish.
• It plays a significant role in deciding the selling price of the items on your menu. If the food cost of an item is high, it just makes sense to sell it at a higher price to garner profit.
• It tells you when to reduce a recipe cost. If you keep up-to-date with your costing and see that you are going beyond your target cost percentage, you can easily plan how to reduce the costs.
• It gives you an insight into the dishs profit margin which you can, in turn, use to promote the high-profit items through suggestive selling and promotions.

How To Calculate Recipe Cost

This post contains some affiliate links, which means that we make a small commission off items you purchase at no additional cost to you.

The recipe cost breakdowns are a big part of Budget Bytes. And while youre not likely to have the exact same food costs as me , I think its helpful to see how each ingredient can impact the overall cost of a recipe. So now Id like to dive a little deeper to show you how I make these calculations, and teach you how to calculate recipe costs yourself. Because even if you do it once, I promise youll learn a lot!

Originally posted 6-30-2013, updated 5-21-2020.

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How To Calculate Food Cost For A Recipe Using Pos Software

To find actual numbers for your restaurant, you should prioritize your inventory management. Start taking full and accurate food inventory each week. This will allow you to know the numbers for your beginning and ending inventory for an optimal period of time and calculate your actual food cost for every recipe regularly. By doing your inventory weekly, youll be able to stay on top of your food usage and associated costs, identify problems quickly, and get them resolved timely.

You can use some features available in your POS system as restaurant food costing software. Here are the steps you should take every week to be able to manage your actual food cost proactively.

Pay Attention To Seasonal Price Fluctuations

Your wholesalers will likely have seasonal price fluctuations as some ingredients are more readily available than others. Adjust your menu options or prices accordingly. If ingredients go up in price or if you notice a particular dish losing popularity, change your menu and upsell more popular and profitable dishes or use seasonal LTO food offerings to avoid getting too close to your break even cost. Your job is to make your customers happy while maximizing revenue.

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How To Lower Your Food Cost Per Dish

Every time you cost a recipe and see that it potentially can be the reason you lose profit, you should make a decision on how to cope with it. Depending on the cause of the food cost increase you may do the following:

• Reduce the amount of the key ingredient in the dish, if its price increases temporarily and you expect it to come back down soon.

• Substitute an ingredient for lower-cost ingredients for the season.

• Reprice the dish if you expect the costs remain high for a long period.

• Train staff to sell more of the menu items that have lower costs and higher profit margins.

• Reconsider the preparation process if the menu item often gets overcooked or spoiled by some other reasons.

• Remove a menu item off the menu if none of these changes work.

If you own a pizzeria and want to find out what pizza recipes bring you profit, use the sales data from your pos system for pizzeria. For example Poster POS users can look at ABC analysis report and find out what are their stars and dogs at a glance.

Having high food cost dishes on the menu is unavoidable. Moreover, a higher food cost for a dish can mean a higher profit at the same time. This is because high-cost dishes sold at high prices may bring in more gross profit dollars and a larger profit. However, you should look at the real numbers and balance high and low food cost dishes on your menu to maximize your profit margin.

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How To Calculate The Cost Of A Recipe

– Last updated: May 29, 2021

Calculating the cost of a recipe can be a great way to ensure that your planned meals for the week will fit into your grocery budget.

Although this can be a time consuming task, it really can help you save money in the long run because you can see the cost of the meal before buying the ingredients and committing to the meal.

If you find that a recipe does not fit into your budget, you can look for substitutions or ways you might be able to make the recipe work for you and your family. This can include reducing or replacing expensive ingredients, or finding a substitute for them.

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Extract The Cost Of Each Serving

Divide the cost of the entire recipe by the number of portions that it serves. This will determine the cost of each serving.

Having a standard recipe with specified item portions helps you in maintaining your recipe costs. It is a good idea to choose a POS with an integrated Recipe Costing feature that would give you detailed reports of the cost incurred in preparing a dish.

How To Deal With Food Price Fluctuations

You can price your menu for profitability today, but prices can change overnight. Food prices are always in flux, and that can make menu costing even more challenging. Overhead costs may also change from month to month, depending on the state of the economy.

For these reasons, it can be difficult to answer the question: how much does food cost per month?

Prior to the pandemic, food prices had been steadily declining. In 2023, were looking at an entirely different picture.

According to the Economic Research Service of the USDA, food prices are expected to rise between 3.5% and 4.5% in 2023.

If you want your restaurant to remain profitable in the coming year, it’s important to adjust your prices accordingly and prepare for higher food costs. Keeping your food costs in that 28% range will allow for a 7% increase in prices.

Padding your menu prices will help maintain profitability, even if the cost of some ingredients rises.

Tracking cost changes can also help ensure that your menu prices arent too low or too high. Cost tracking is a simple process:

• Create a spreadsheet with all of the key ingredients you purchase
• Track the pricing history of each ingredient

Tracking pricing will make it easier to see when costs spike and help you understand the average cost of food per month for your restaurant.

Another option is to work with a supplier who can guarantee or lock-in prices for a certain period of time.

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How To Calculate The Cost Per Serving

Once you know the cost for the entire recipe, to calculate the cost per serving, simply divide the total cost by the number of servings stated in the recipe.

In the example above, lets say that chicken dish serves 4 servings and it cost $7.15 to make. That means the cost per serving is $7.15/4 = $1.79 per serving.

Is Knowing Your Food Cost Per Menu Item Important

Knowing your food cost per menu item is like keeping your finger on the pulse of your restaurants profitability. When it comes to restaurant metrics, people usually want to know their:

• Target numbers, to know what they should strive to reach to meet their business goals.

• The industry average, to figure out how healthy their business is compared to their competition.

• Actual numbers, to stay aware of what is going on in their business at the moment and if they are making any progress compared to the previous periods.

According to the restaurant industry statistics, a profitable restaurant on average has a 28-35% overall food cost. However, knowing the industry average food cost may hardly help you to improve your business performance because the healthy food cost percentage varies greatly depending on the restaurant concept.

Moreover, the food cost percentage varies for every dish. Youll never have a menu with all dishes meeting the same 28-35% of food cost. Instead, in order to level up your overall restaurant food cost, youll have to balance high and low food cost items on your menu taking into account their sales volumes.

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What Is Food Cost

At its core, food cost is simply the cost incurred by your restaurant on food after taking into consideration all external and implicit costs. Food cost is used by restaurant operators to determine how much money they make back on the sale of a dish compared to how much it costs to make that dish.

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When You Are Unsure About The Serving Size

When it is hard to estimate the serving size, I just do my best to make an accurate guess based on the information I do have.

For things like dried spices and seasonings, it can be tough to figure out the exact cost per serving, as measuring out ¼ teaspoon of something like dried basil would require a very precise scale. Because of this, I use a simple blanket cost for these spices:

• Salt costs about $0.05 cents per 1 teaspoon.
• Spices and dried herbs cost $0.10 per teaspoon. I get most of my spices at Trader Joes, Aldi or Thrive Market to keep the prices down.
• If you find that you have a very expensive herb/spice that you paid more than $5 per bottle for, you can increase the cost to $0.15 or $0.20 per teaspoon.

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Create A Menu Item Food Cost Spreadsheet

A good way to start costing your recipes is to create a menu item food cost spreadsheet in Excel or Google Sheets.

Its basic but effective.

On the worksheet each menu items ideal food cost is calculated based on the items ingredients, portions and current price.

Create five columns:

List the ingredients for each menu item and the quantity of each ingredient in detail on the worksheet. Use the same recipe unit, i.e., gram, volume measurement or number of pieces for each ingredient.

At the bottom of the column with your recipe cost you add everything up. The sum of the food cost of the individual menu-it is the ideal food cost of your menu.

If you are a spreadsheet wizard, make things easier for yourself by creating a separate list with all your ingredients, including current price and unit. Link these respectively to column one, two and four.

This way, when prices change , you wont have to update every single recipe sheet. Simply update the ingredients list to update all recipes with current supplier prices.