Menu pricing: how to calculate food cost and set prices

The chef has just finished a new autumn dish and wants it on the menu this week. "Around nineteen," you say, because that is what the place down the road charges for something similar. Nobody has costed it. A month later it is the best seller on the menu, the kitchen is proud, and when the accountant looks at the numbers, the dish barely earns anything.

That is how many menu prices are set: by feel, by what the neighbours charge, by what the dish used to cost. Feel and competition both matter. But they work best on top of one number you can know exactly, which is what the plate costs you.

Start with food costing: what the plate really costs

Food costing means working out the cost of the ingredients on one plate. A food service textbook calls this the standard portion cost: the cost of the ingredients in a standard recipe, divided by the number of portions it makes. For that you need three things:

• A written recipe with exact quantities. Everything on or beside the plate counts: the oil, the butter, the garnish, the bread that arrives first.
• A fixed portion size. If the kitchen's 180 grams drifts to 220, the cost on paper is wrong.
• The true cost of each ingredient. That is where yield comes in.

Yield: you pay for what you buy and serve what is left

After trimming and peeling, less remains than you bought. The textbook calls the weight you buy "as purchased" and what is left "edible portion", and defines yield as edible weight divided by purchased weight, times 100. Divide the price you pay by the yield and you get the cost of what you can actually serve. Skip this step and every dish looks cheaper than it is.

The USDA's Food Buying Guide lists average yields for many foods, and it also publishes a table of cooking yields for meat and poultry. They are averages, and the guide itself says actual results depend on portioning and handling. Weigh a few batches in your own kitchen.

Here is a made-up plate, roast chicken with potatoes and green beans, in whatever currency you price in:

How to calculate food cost percentage

Food cost percentage is the plate cost divided by the selling price. If this plate sells for 13.50, then 4.00 divided by 13.50 is 29.6 percent. The textbook gives the same formula.

You can also work it out for the whole restaurant. Take the stock you started the month with, add what you bought, subtract the stock you ended with, and divide the result by your food sales. The same textbook describes this calculation, and suggests comparing it with the "standard" cost, meaning the plate costs of what you actually sold. A big gap points to waste, portions drifting, ordering mistakes or recording errors.

What is typical? The US National Restaurant Association's 2025 operations report put the median food and non-alcohol beverage cost of full-service restaurants at 32.0 percent of sales in 2024, a little below the 34 percent average of the report's last three editions. The association is clear that these figures are not standards or goals for an individual restaurant. Treat them as a reference, not a target.

Set the price from a target

Once you have a target food cost percentage, the price follows: plate cost divided by the target. At 30 percent, 4.00 divided by 0.30 is 13.33. The textbook shows the same sum as a mark-up: divide 1 by the food cost percentage, then multiply the plate cost by the result.

Where does 30 percent come from? One approach in the textbook starts from what you expect to earn. Take your expected sales, subtract labour, overheads and the profit you want, and what remains is the food budget. Its example: 10,000 in sales, less 6,000 for labour, 1,000 for overheads and 500 for profit, leaves 2,500 for food, or 25 percent.

Then round to a price that suits your menu. At 13.50 the food cost is 29.6 percent and each plate leaves 9.50 after ingredients.

Look at money, not only percentage

A low food cost percentage feels safe, but you cannot pay a wage with a percentage. Compare two made-up dishes:

The steak has more than double the food cost percentage and still earns 7.20 more per plate. The textbook makes the same point with its own example: the key to a good menu is not to keep food cost percentages low, but to keep contribution margins, the money left after ingredients, high. Once you have prices and sales, our guide to menu engineering shows how to find the dishes worth pushing.

What else belongs in the price

• Local competition. Check what similar dishes cost nearby, comparing like with like: portion, quality and setting. The textbook notes that a calculated price may be adjusted because others sell the same dish for a different price.
• Perceived value. Guests judge a price against the room, the portion and the description. A dish that is described well and looks generous can carry a price that a vague one cannot. Our guide to restaurant menu design covers descriptions.
• Labour-heavy dishes. A plate cost counts ingredients, but a dish that takes an hour of preparation costs you more than its ingredients. Researchers who study restaurant costing point out that managers often lack a full picture of their costs, which can lead to inaccurate and potentially unprofitable prices. Estimate the kitchen time a plate takes, and either price for it or choose the lower margin on purpose.

Keep your costs current

Supplier prices move, so a costing done in spring may be wrong by autumn.

• Keep ingredient prices in one place. In a spreadsheet, one price per ingredient lets a single change update every dish that uses it.
• Re-check the best sellers first. When an invoice changes noticeably, start with the dishes you sell most.
• Compare actual with standard each month. The gap shows when prices, yields or portions have drifted. The textbook calls a gap of around 10 percent acceptable as a rule of thumb, while noting that no established guideline exists.
• Change prices in small, planned steps. Then change them everywhere at once: website, printed menus, booking platform and QR codes.

Show prices so guests can read them

• Put the price right after the dish name, or directly below it. A price in a far-right column is hard to follow on a phone, as our menu design rules explain.
• Use one format everywhere. The same number of decimals, the same currency treatment and the same place on every dish.
• Give options their own price. Sizes, sides, and glass and bottle prices belong beside the dish.
• Think about the currency sign. In a Cornell study of 201 diners at one café, guests given menus with plain numbers spent about 8 percent more than guests whose menus used a dollar sign, while prices spelled out in words did no better than the sign. The researchers called the effect modest, and it comes from a single restaurant, so treat it as an idea to test, not a rule. Whatever you choose, never hide or blur a price.

How Tastiana shows your prices

Tastiana does not cost dishes or set prices, so the sums above stay with you. It reads the menus already on your website, PDFs included, and turns them into a guide guests read on a phone without zooming, with search, prices and descriptions exactly as printed, your menu's own dietary and allergen labels, Help me choose suggestions that only use real dishes from your menu, answers to guests' questions grounded in it, and a button to your existing booking service. It checks your website daily and larger changes wait for your approval, and it never changes a dish or a price: you edit your menu as you always do. Try the demo to see your prices on a phone.