Menu Pricing Calculator

How the calculator works

Cost-based pricing starts from what a dish costs you and a decision about how much of the selling price ingredients should take up.

menu price = ingredient cost per serving / target food cost percentage

Write the target as a decimal: 30 percent is 0.30. The calculator then shows what you keep on each plate.

gross profit = menu price - ingredient cost

markup = menu price / ingredient cost

Worked example

A rice bowl costs $3.00 in ingredients. You want food to be 30 percent of the price.

1. Price: 3.00 / 0.30 = $10.00.
2. Gross profit: 10.00 - 3.00 = $7.00.
3. Markup: 10.00 / 3.00 = 3.33 times cost.

A sandwich costs $2.50 and your target is 35 percent.

1. Price: 2.50 / 0.35 = $7.14.
2. On a menu you would round that to $7.25 or $7.50.
3. At $7.50, the food cost is 2.50 / 7.50 = 33 percent, a little better than target.

Target percentage and markup are the same thing

Some people think in food cost percentage and some in markup. They are two ways of writing one decision:

• 25 percent food cost = 4 times cost
• 28 percent = 3.57 times
• 30 percent = 3.33 times
• 33 percent = 3 times
• 35 percent = 2.86 times
• 40 percent = 2.5 times

A lower target percentage means a higher price for the same dish. If “three times cost” is the rule you were taught, you are working to a 33 percent food cost.

Choosing a target

The calculator opens at 30 percent because the box needs a starting number. It is not a recommendation. Your own target should come from your own costs.

One way to find it is to work backward from a month of trading:

1. Add up everything you spend that is not food: wages, rent, energy, packaging, fees, insurance.
2. Add the profit you need to take out.
3. Divide that total by your sales. This is the share of each dollar that is already spoken for.
4. What is left is the most you can spend on food.

If non-food costs and profit come to 68 percent of sales, your food cost has to average 32 percent or less. Individual dishes can sit above or below that, as long as the mix of what you sell averages out.

The formula gives a floor

The number that comes out is the lowest price at which the dish meets your target. It is not automatically the right price.

Round up to a real price point. Nobody charges $7.14. Move to the next price that looks natural on your menu.

Check the market. If every similar place nearby sells the dish for $12 and your formula says $9, you have room. If your formula says $16, you need a reason customers will pay it, or a cheaper recipe.

Look at the whole menu. A few well known items are often priced keenly because customers compare them, while sides, drinks and specials carry more margin.

When the cost changes

Prices of ingredients move, and a menu price set a year ago may no longer meet its target. Re-run the dish through the calculator when a main ingredient changes price.

You then have three choices: raise the price, change the portion, or change the recipe. A smaller change to two of them is often easier on customers than a large change to one.

Using the chart

The chart above shows the menu price for a range of ingredient costs at five targets. Find your cost in the left column and read across to see how the price changes with the target. The gap between 25 and 35 percent on a $4 plate is $16.00 against $11.43, which shows how much rides on that one decision.

Tips and common mistakes

Start from an accurate cost. The price is only as good as the cost you feed in. Include the oil, the garnish and the sauce, and use the Recipe Cost Calculator if you have not costed the dish yet.

Price the serving you serve. If the recipe says 6 portions and your cooks plate 5, your real cost per serving is a fifth higher.

Leave sales tax out. Work with the price before tax, since tax is not money you keep.

Review the menu as a whole. One underpriced bestseller costs more than several overpriced dishes that nobody orders.