The Complete Guide to Menu Cost Formulas
Follow these menu cost steps to turn ingredient costs into plate cost, food cost %, and prime cost for better control.
Why Accurate Costs Protect Margins
Menu cost is the real dollar amount it takes to make each item on your menu. It is not a guess, and it is not the same as what you pay for a case of ingredients. Menu cost breaks every recipe down into portion-level costs so you know what one plate, bowl, sandwich, or combo actually costs you to produce.
When restaurant owners say, My food cost is high, it often means they do not know their menu costs at the item level. You might be making money on some dishes and losing money on others without realizing it. Menu costing gives you clarity so you can price correctly, control portions, and stop profit leaks.
To keep it simple, menu costing usually comes down to three numbers -
1. Plate Cost (Cost Per Serving) - This is the total cost of ingredients used to make one serving of a menu item. If a burger uses a bun, patty, cheese, sauce, and fries, plate cost is the combined portion cost of all of those ingredients.
2. Food Cost % (Food Cost Percentage) - This tells you how much of the menu price is going toward food. If an item costs $3.00 to make and you sell it for $12.00, your food cost % is 25%. This is one of the fastest ways to see if an item is priced to support a healthy margin.
3. Prime Cost - Prime cost is your food cost + labor cost combined. It is the clearest "big picture" number for restaurant profitability because food and labor are usually your two biggest controllable expenses. Even if one dish has a good food cost %, your overall business can still struggle if labor is out of control - prime cost helps you see that.
The reason menu costing matters is simple - you cannot protect profit if you do not know your true costs. Ingredient prices change, portion sizes drift, and recipes get tweaked over time. When you track menu cost the right way, you can confidently answer questions like -
- "Is this menu item actually profitable?"
- "Do I need to raise my price, or fix the recipe?"
- "Which items should I promote more?"
- "What should my food cost % target be to hit my profit goals?"
Once you understand menu cost at the item level, pricing becomes less emotional and more math-based. It helps you make smarter decisions without guessing - and that is the foundation for everything we'll cover in the next sections.
What You Need Before You Start Costing
Before you calculate menu cost, you need the right inputs. If your numbers are messy, your results will be wrong - no matter how good your formula is. The goal is to build a simple costing setup you can reuse for every menu item.
1) Standardized recipes
You need a written recipe for each menu item with -
- Every ingredient listed (including oils, sauces, seasonings, garnishes)
- Exact portion sizes (ounces, grams, cups, pieces - pick a standard)
- Prep instructions that impact yield (trim, cook loss, draining, etc.)
If two cooks make the same dish two different ways, your cost will swing. Standard recipes reduce that.
2) Current vendor pricing
Pull your most recent invoices or vendor portal pricing. You need -
- Item name and pack size (ex, 4/5 lb bags, 6/number 10 cans, 2/1 gal)
- Price per case
- Any consistent discounts you always get
Important - don't use old prices "because they're close." A small change (like chicken or cheese) can move your costs fast.
3) Unit conversions
Most vendors sell in cases, but you serve in portions. So you'll need quick conversions like -
1 lb = 16 oz
1 gallon = 128 fl oz
1 quart = 32 fl oz
Then you convert case cost - unit cost - portion cost. Example idea (not full math yet), if you buy a 10 lb case, you'll convert that into cost per ounce, then multiply by the ounces used in the recipe.
4) Yield and waste assumptions
Some ingredients don't turn into 100% usable product -
- Raw meats shrink when cooked
- Produce has trim loss (peels, cores, bruising)
- Fry oil and batters get tossed
- Sauces left in pans become waste
You need a consistent way to account for it. Otherwise, your plate cost will look better than reality.
5) A simple costing sheet
Whether you use Excel, Google Sheets, or software, keep the layout clean. At minimum, include these columns -
- Ingredient
- Purchase unit (case, lb, bag)
- Purchase price
- Unit conversion (how many oz/grams/each per purchase unit)
- Cost per unit (cost per oz/gram/each)
- Portion used per serving
- Portion cost (your final ingredient cost)
Once you have these five inputs - recipes, pricing, conversions, yields, and a sheet - you're ready to calculate plate cost accurately. That's where menu costing becomes real, and where most pricing mistakes get exposed.
Plate Cost
Plate cost (also called cost per serving) is the most important menu cost number because it tells you, in dollars, what one serving truly costs to produce. Once you know plate cost, everything else - food cost %, pricing decisions, and profitability - gets much easier.
The plate cost formula (simple version)
Plate Cost = (Portion cost of each ingredient) + (Portion cost of sides, garnishes, and sauces)
In other words, you calculate the cost of every ingredient used in one serving, then add them together.
Step 1. Convert your vendor price into a usable unit cost
Your invoice might say you bought -
- A case
- A bag
- A pound
- A gallon
- But your recipe uses-
- ounces
- grams
- cups
- each
So you convert purchase price into a "cost per unit" you can multiply. For example -
- Case price = cost per pound
- Cost per pound = cost per ounce
- Cost per ounce = cost for the portion used in the recipe
If you skip this step and guess, plate cost will always be off.
Step 2. Multiply unit cost by the portion used
Once you have a unit cost, you calculate each ingredient's serving cost -
Ingredient Portion Cost = Unit Cost x Portion Used
Example logic -
- If cheese costs $0.25 per ounce
- And the recipe uses 2 ounces
- That ingredient contributes $0.50 to the plate cost
Do this for every ingredient, then sum them all.
Step 3. Account for yield, trim, and cooking loss
Some items lose weight during prep or cooking. If you buy 10 pounds of raw chicken, you might only get 7.5 pounds of cooked, usable chicken after trimming and shrink. That means your "true cost per cooked ounce" is higher than the raw cost.
A practical way to handle it -
- Estimate a yield percentage (example, 75% usable)
- Adjust your unit cost upward based on yield
This keeps plate cost closer to reality.
Step 4- Don't forget the "small stuff" that adds up
Most menu cost errors come from leaving out -
- Sauces and dips
- Seasonings and spice blends
- Oils, butter, and cooking sprays
- Garnishes (green onion, parsley, lemon)
- Sides (fries, rice, salad)
- To-go packaging for takeout items
Even if each one seems cheap, together they can add $0.30-$1.50+ per plate depending on the item.
When your plate cost is correct, your next step is easy - use it to calculate food cost % and check whether your menu price makes sense.
Food Cost Percentage
Once you know your plate cost, the next step is calculating food cost percentage. Plate cost tells you the dollar amount to make the item. Food cost % tells you whether your menu price gives you enough room for profit after food expenses.
The food cost % formula
Food Cost % = (Plate Cost / Menu Price) x 100
Example -
- Plate cost = $3.00
- Menu price = $12.00
- Food cost % = (3.00 / 12.00) x 100 = 25%
That 25% becomes a quick "profit check." If your target food cost is 28% and the item is at 25%, you're likely in a good spot. If it's 38%, you have a problem to solve.
What's a "good" food cost %?
There is no universal perfect number because restaurants have different -
- Concepts (QSR vs full service)
- Portion sizes and ingredients
- Labor models and overhead
- Competitive pricing pressure
But here's the key - your target must match your business reality. Higher-labor concepts often need tighter food cost control. Lower-labor concepts may allow slightly higher food cost if pricing and volume support it.
Instead of chasing a random industry number, use food cost % to answer a practical question -
"Does this item leave enough gross margin to cover labor and overhead?"
Red flags your food cost % will expose
Food cost % is useful because it quickly shows where your menu is leaking money. Common red flags include -
1. A popular item with a high food cost % - This can quietly drag down overall profitability because it sells a lot.
2. An item priced too low for what it contains - Often happens with proteins (steak, chicken wings, seafood) and high-dairy items.
3. Portions drifting over time - If your recipe says 6 oz but the line "eyeballs" 7-8 oz, your food cost % will creep up fast.
4. Uncounted add-ons - Free extra sauce, extra cheese, or bigger side portions can raise plate cost without raising price.
What to do when food cost % is too high
You usually have three options -
1. Raise the price (if the market can support it)
2. Adjust the recipe/portion (reduce protein size, swap ingredients, tighten specs)
3. Lower the ingredient cost (vendor comparison, alternative products, better yield)
Food cost % turns menu costing into decision-making. And once you combine food cost with labor, you get the bigger number that matters most - prime cost.
Prime Cost
Food cost % helps you price menu items. But if you want a clearer picture of restaurant profitability, prime cost is the number that matters most. Prime cost combines your two biggest controllable expenses - food (COGS) and labor - into one metric you can track weekly.
What prime cost tells you
Prime cost answers a simple question -
- "After paying for food and labor, how much money is left to cover everything else and still make a profit?"
Everything else includes rent, utilities, repairs, marketing, credit card fees, insurance, and more. If prime cost is too high, those remaining expenses will squeeze you, even if your sales look strong.
Prime cost formula
Prime Cost = COGS + Labor Cost
To express it as a percentage of sales (which is how most owners track it) -
Prime Cost % = (COGS + Labor) / Total Sales x 100
- COGS (Cost of Goods Sold) includes food and beverage costs used to generate sales.
- Labor Cost includes hourly wages and typically the related employer costs tied to staffing.
What to include in prime cost
To keep it consistent, define what counts as "labor" for your restaurant and stick to it. Most restaurants include -
- Hourly wages (FOH + BOH)
- Overtime
- Payroll taxes (employer portion)
- Benefits if you offer them
Some operators also include salaried managers because it's still labor expense. Others track it separately. The important thing is consistency so you can compare week to week.
For COGS, include -
- Food ingredients
- Beverage costs (if you sell alcohol, track separately if you want)
- Condiments, paper goods, and packaging if they are meaningful for your concept (especially QSR and takeout-heavy operations)
Why prime cost is tied to menu cost
Menu cost controls your food side of prime cost. If plate costs rise but prices don't, your prime cost will climb. On the labor side, scheduling, productivity, and training control how many labor hours it takes to produce and serve those menu items.
This is why menu pricing decisions can't be made in a bubble. A low food cost % menu item can still be a problem if it takes lots of labor to prep and execute. Likewise, a higher food cost item might be fine if it sells at a strong price and is quick to produce.
Prime cost becomes your "dashboard" number. Once you know it, you can set realistic pricing targets, control staffing decisions, and spot problems early - before they show up as "we're busy, but we're not making money."
How to Cost Common Tricky Items Correctly
Some menu items are easy to cost because the ingredients are obvious and the portions are clear. Others get messy fast. If you don't cost these correctly, your plate cost will look better on paper than it is in real life.
1) Combos, bundles, and meal deals
Combos (burger + fries + drink) should be costed as a set, not as "whatever feels right." Start by calculating the plate cost of each component -
- Main item plate cost
- Side plate cost
- Beverage cost (including cup, lid, straw)
Then add them together to get the combo plate cost. If you discount the combo price, your food cost % can jump quickly, so this is one of the first places to check when profits feel tight.
2) Fry oil, spices, and "small-usage" ingredients
These are easy to ignore and still expensive over time. Use a simple, fair method -
- Find the purchase price and usable amount (ounces, grams, servings)
- Estimate usage per serving (example, 0.1 oz seasoning blend, 0.25 oz oil absorption)
- Apply a consistent number across the menu
You don't need perfection. You need consistency that keeps you from pretending these costs are zero.
3) Free items and comps (chips, salsa, bread, sauces)
If you give it away, it still costs money. Cost it the same way you cost anything else -
- Portion size unit cost. Then decide where it "lives" financially.
- Build it into the price of the entree
- Add it into a category cost (like complimentary table items)
- Or limit portions and define refills clearly
If you don't account for comps, your actual food cost will always run higher than your menu costing suggests.
4) Delivery packaging and disposables
For takeout-heavy restaurants, packaging can be a real cost driver. If you're selling on delivery apps and using multiple containers, include -
- Bowl/box
- Lid
- Bag
- Utensil kit
- Napkins
-Sauce cups
Treat packaging like an ingredient with a portion cost. If it adds $0.60-$1.25 per order, that needs to be reflected in pricing decisions.
5) Sauces and house-made prep recipes
For house-made sauces, dressings, and prep items, cost them like mini-recipes -
- Build a recipe cost for the full batch
- Divide by total yield (ounces or portions)
- Apply a portion cost to every dish that uses it
This is the cleanest way to keep costs accurate without guessing.
When you cost these tricky items correctly, your plate costs become realistic - and your food cost % stops "mysteriously" running higher than expected. Next, you'll use these numbers to actually fix your menu and pricing decisions.
How to Use Menu Cost Numbers to Fix the Menu
Menu costing is only useful if it leads to better decisions. Once you have plate cost, food cost %, and prime cost targets, you can use those numbers to improve profitability without guessing.
Step 1. Build a simple menu cost review list
Create a list of your menu items with these columns -
- Menu item name
- Menu price
- Plate cost
- Food cost %
- Gross profit dollars (Menu price - Plate cost)
That last one - gross profit dollars - matters more than many owners realize. An item with a 35% food cost might still produce strong profit dollars if it sells at a high price. Meanwhile, a cheap item with a low food cost % might not contribute much profit per sale.
Step 2. Sort items into quick decision groups
You don't need complicated matrix models to start. Sort your items into four practical buckets -
1. High profit / High sales - Protect these. Keep portions consistent and ingredients stocked.
2. High profit / Low sales - Promote these. Place them in a better menu spot, rename them, add a photo, or make them a special.
3. Low profit / High sales - These are the biggest opportunity. Small changes here can have a huge impact because they sell often.
4. Low profit / Low sales - Consider removing them or reworking them. They take prep time and space without paying you back.
Step 3. Choose the right fix (price, portion, or product)
When an item is underperforming, you typically have three levers -
Raise the price
- Best when the item is popular and the market will accept it
- Consider small increases rather than big jumps
Reduce or tighten the portion
- Best when plate cost is high due to inconsistent portioning
- Use scoops, scales, ladles, and portion bags to lock it in
Swap ingredients or adjust the recipe
- Best when an ingredient has spiked in price
- Examples, change the cheese blend, reduce garnish, swap side option, adjust sauce portion
Step 4. Set "pricing guardrails" for new items
Before you launch a new menu item, decide -
- Your target food cost % range
- Your minimum gross profit dollars per item
- Whether the item is labor-heavy (prep time) or fast
This keeps you from adding menu items that look exciting but quietly hurt margins.
Push the items that give you strong profit dollars and are easy to execute. Be careful promoting low-profit items just because they're popular - if you discount them, your margin can disappear.