Menu & Food

How to Cost a Restaurant Menu Properly

28 April 2025 — Chef Anwar Miah

Most restaurants undercharge because they cost their menus wrong. Here is a clear process for calculating portion cost, setting margins, and building a menu that actually makes money.

Why Most Restaurant Menus Are Under-Costed

Many restaurant owners price dishes based on instinct, competitor pricing, or rough estimates rather than actual figures. The problem is that small errors across an entire menu quickly become serious losses. A dish that is under-priced by even £1 can remove thousands of pounds from annual profit if it sells regularly.

The biggest issue is that many menus are costed using raw ingredient prices only. Owners often calculate the cost of the chicken, rice, sauce, or garnish without accounting for trimming, cooking loss, spoilage, staff handling, or portion inconsistency. What looks profitable on paper often delivers far less margin in service.

Another common mistake is copying prices from nearby restaurants. Your labour costs, rent, energy bills, supplier pricing, and wastage levels may be completely different. Matching another restaurant's pricing without understanding your own numbers can damage profitability very quickly.

Menus also become outdated. A dish costed properly twelve months ago may now be losing money because supplier costs have increased and the selling price never changed.

How to Calculate True Portion Cost

Accurate menu costing starts with the true portion cost of every dish. This means calculating the exact amount of usable product that reaches the plate.

Take chicken breast as an example. If you buy a 5kg case for £35, the cost appears to be £7 per kilo. However, once trimming and cooking loss are factored in, your usable yield may only be 4kg. Your real usable cost is therefore closer to £8.75 per kilo.

The same principle applies across the kitchen. Vegetables lose weight during prep. Meat shrinks during cooking. Herbs spoil quickly. Oil gets discarded. Sauces may not fully batch out as planned. Every one of these factors affects the real cost of a dish.

Portion control is equally important. If one chef serves 170g of protein and another serves 220g, your GP disappears without anyone noticing. This is why proper recipe specs and weighing portions matter. Consistency protects margin.

A proper costing sheet should include every component on the plate, including sauces, garnishes, cooking oils, bread service, side salads, and disposables where relevant. Small costs ignored repeatedly become large losses over time.

What Food Cost Percentage Should You Aim For?

There is no single perfect food cost percentage for every restaurant. The correct target depends on your business model, labour structure, and average spend per customer.

Quick-service restaurants and takeaways often aim for food costs around 25% to 30%. Their labour model is usually leaner, and speed allows stronger margins.

Casual dining restaurants commonly operate between 28% and 35%, depending on cuisine and staffing levels. Restaurants with extensive menus often struggle to stay lower because wastage increases across more ingredients.

Premium restaurants may accept higher food costs because labour, experience, and service justify higher menu prices. Some fine dining operations work at 35% food cost or above, but compensate with stronger average spends and tighter operational control.

The key point is that food cost percentage alone does not determine success. A restaurant with a 40% food cost can still be profitable if labour, pricing, and overheads are managed properly. Equally, a restaurant with a 25% food cost can still fail if operational costs are uncontrolled.

How to Set a Selling Price Properly

Once you know the true portion cost, pricing becomes far more straightforward.

If a dish costs £4 to produce and your target food cost is 30%, you divide the dish cost by 0.30. That gives a selling price of roughly £13.33 before VAT considerations and rounding.

This formula gives a starting point, not a final answer. You still need to consider your market position, customer expectations, local competition, and perceived value.

For example, a £14 pasta dish may feel acceptable in central London but overpriced in another area if presentation and experience do not support the price point.

Menu engineering also matters. Not every dish needs identical margins. Some dishes should act as strong profit generators, while others exist to attract customers or support menu balance. The objective is overall menu profitability, not identical GP across every plate.

Pricing too low is often more damaging than pricing slightly high. Low pricing creates pressure on labour, ingredients, and service quality. Once customers become used to cheap pricing, increasing prices later becomes harder.

The Costly Mistake of Not Updating Menu Prices

Supplier pricing changes constantly. Meat, dairy, cooking oil, rice, flour, and fresh produce have all seen major fluctuations in recent years. Yet many restaurants still use menu costings created once and never reviewed again.

This creates hidden losses. If your chicken cost rises by 20%, but your menu price stays the same, your profit margin shrinks immediately. Across high-volume dishes, the financial impact becomes severe.

Menu costing should not be treated as a one-off exercise. Strong operators review core dishes regularly, especially best sellers. Some review monthly. Others review quarterly. The important point is consistency.

Good restaurants know their numbers in detail. They understand exactly what each plate costs, where margin is made, and where wastage is hurting the business. Without that visibility, profitability becomes guesswork rather than management.