For recording purposes, create a recipe cost sheet for each of your dishes. Here is an example.
As you can see, it’s an extension of the Standard Recipe, providing costing details.
Selling Price
Once you have your food costs, you can figure out the selling price of your dishes. The basic formula is:
Selling Price = (Food Cost + Labor Cost + Overhead Cost) + Profit
Your selling price should include all costs plus the profit you would like to earn.
What Should the Food Cost Percentage of Your Selling Price Be?
To compute the selling price, we need the food cost to only be a certain percentage of the selling price.
The amount varies from one restaurant section to another and is influenced by other costs, such as labor, overhead, and target profit. It generally falls within the profit of 30% to 45%.
Food Costing in Practice
Here is an example to show how to find the selling price of a dish:
- A restaurant has a target food cost percentage of 33%.
- Their newest recipe was calculated to have a food cost of ₱25 per portion.
- Applying the 33% rule, the target selling price = ₱25 divided by 0.33 = ₱75.75
Given this number, the restaurant can decide on the final selling price by considering other factors such as competition, volume, and labor costs.
FAQs
What is the formula for food cost percentage for restaurants? The formula for how to calculate restaurant food cost percentage is (Total cost of goods sold / Total food sales) x 100 = Total food cost percentage for a period of time.
How much should food costs be for a restaurant? ›
What is a good food cost percentage? To run a profitable restaurant, most owners and operators keep food costs between 28 and 35% of revenue.
How to calculate how much to charge for food? ›
How to Price Restaurant Food from Food Cost. The first and most common way to price a food menu is to start with each item's ideal food cost and price to achieve it. Food cost is the percentage of an item's menu price spent to acquire and prepare that item. Most restaurants run a food cost of between 28–35%.
What are the steps in food costing? ›
How do you calculate food costs? To calculate food cost percentage, add your initial inventory to the sum of all your purchases and then subtract the final inventory value from the total. Finally, divide the result by total food sales.
How do chefs calculate food cost? ›
To calculate actual food cost, start with your beginning inventory and purchases within a given period. Subtract your ending inventory and then divide that by your total sales and multiply by 100.
What do two dollar signs mean for restaurants? ›
Two dollar signs ($$): generally means that the prices at the restaurant are moderate. Three dollar signs ($$$): generally means that the prices at the restaurant are relatively expensive. Four dollar signs ($$$$): generally means that the prices at the restaurant are very expensive.
What is the average markup on restaurant food? ›
Average Markup of Food for Restaurants. The food industry abides by a cost-to-menu price standard, which is 28% to 32%. This means that for any given menu item the restaurant should charge at least double.
What is the Q factor in food costing? ›
A Q factor is the cost of anything extra required in the production and service of the menu item. These include complementary items like bread, butter, and even salt and pepper. Typical Q-factors add about 10% to the food cost. Q Factor Itemization.
What should labor cost be in a restaurant? ›
You should aim to keep your labor costs somewhere between 28-33% of your total revenue. While this isn't a steadfast rule – fine-dining establishes, for example, allocate much more to labor costs — spending too much on labor makes it much harder for your restaurant to turn a profit.
What is P&L in restaurants? ›
A restaurant profit and loss statement also referred to as a restaurant P&L, shows your business' costs and revenue (net profit or loss) during a specified period of time.
How do you price your food product for maximum profitability?
- Step 1: Calculate your cost of goods sold. ...
- Step 2: Research your target market. ...
- Step 3: Choose a pricing strategy. ...
- Step 4: Set your initial price. ...
- Step 5: Monitor your performance. ...
- Step 6: Adjust your price as needed. ...
- Here's what else to consider.
For recipe development without a photo, half the people charge at least $250 per recipe and a great majority charge at least $200. The maximum most developers have made per recipe is between $300 and $400 but a significant number have made over $700 per recipe.
What is the formula for cost to serve? ›
To calculate your cost to serve each customer, you'd add your direct and indirect costs of serving existing customers during a given period and divide it by the total number of customers.
What is the formula for cogs in restaurants? ›
To calculate the COGS ratio, divide your total food and beverage costs by your total revenue. For example, if your restaurant had $100,000 in total revenue last month and $30,000 in food and beverage costs, your COGS ratio would be 30%.
How do you calculate food cost profit? ›
The formula for gross profit margin is revenue (total food sales) – the cost of goods sold (total food cost) / revenue (total food sales). The sweet spot for gross profit margins is around 70% for many restaurants. In other words, you want the restaurant to keep 70 cents of every dollar earned.
What is the formula for profit in a restaurant? ›
Net profit margin formula
To find your net profit margin, you need to deduct all costs from your revenue over a given time period, then divide that sum into your revenue. It looks like, at 33%, your pizza shop's net profit margin is less than its gross profit margin (61%), which is to be expected.
