A menu price is a decision, not a guess. Behind every good one are three numbers: what the plate costs you to make, how much of each sale you can afford to spend on food, and how many dollars the dish leaves you after its ingredients. Get those three right and pricing stops feeling like a coin toss.
This guide walks through each step with one worked example. The figures in the example are illustrations — swap in your own supplier prices and costs as you go.
Step 1: Cost the plate
Start with the recipe exactly as your cooks make it, portion by portion. For every ingredient you need three things: the price you pay, the unit you buy it in, and how much actually ends up on the plate.
That last part matters more than most people expect. A pound of chicken bought is not a pound of chicken served — trimming, bones and cooking loss all take their share. The share you keep is the yield.
Usable cost of an ingredient
Price paid per unit ÷ Yield % = Cost per usable unit
Batch items such as sauces, rice or dough are easiest to cost once as their own recipe, then use a cost per ounce or per portion. Add a small allowance for things that are hard to measure per plate — oil, salt, spices — and include packaging for takeout orders.
| Ingredient | Portion | Cost |
|---|---|---|
| Chicken thigh (90% yield) | 6 oz usable | $1.33 |
| Curry sauce (batch recipe) | 5 oz @ $0.12/oz | $0.60 |
| Basmati rice, cooked (batch) | 8 oz @ $0.05/oz | $0.40 |
| Garnish (cilantro, onion) | — | $0.10 |
| Small-items allowance (oil, salt, spices) | — | $0.12 |
| Plate cost (dine-in) | $2.55 | |
| Takeout packaging (container, lid, bag) | — | $0.45 |
Step 2: Know your food cost percentage
Food cost percentage tells you how much of each sale goes to the ingredients on the plate. It is the number most kitchens use to compare dishes and track costs over time.
Food cost percentage
Plate cost ÷ Menu price × 100
At a price of $12.00, our example plate runs at $2.55 ÷ $12.00 = 21%. At $10.00 it would be 26%. The same formula works in reverse, which is what makes it useful for pricing — once you know the percentage you are aiming for.
Step 3: Find your target from your own numbers
There is no single “right” food cost percentage. A café with low rent and a small team can afford a different food cost than a full-service restaurant downtown. The most reliable target is the one you work out backward from your own budget.
Your food budget
Sales − (Labor + Overhead + Profit you want) = What you can spend on food
| Amount | Share of sales | |
|---|---|---|
| Sales | $60,000 | 100% |
| Labor, including payroll taxes | $19,800 | 33% |
| Overhead (rent, utilities, insurance, card fees, software, marketing) | $15,600 | 26% |
| Profit you want to keep | $6,000 | 10% |
| Left for food and beverage | $18,600 | 31% |
In this example, food and beverage can average about 31% of sales. That becomes the target — for the menu as a whole, not for every single dish.
Price from your target
Plate cost ÷ Target food cost % = Starting price
For the curry: $2.55 ÷ 0.31 = $8.23. Another way to write the same thing is a markup factor: 1 ÷ 0.31 = 3.23, and $2.55 × 3.23 gives the same starting price. This is a floor to reason from, not the final answer.
Step 4: Look at dollars, not only percentages
Percentages are good for spotting problems, but you pay rent in dollars. Contribution margin is what a dish leaves you after its ingredients.
Contribution margin
Menu price − Plate cost
| Dish | Price | Plate cost | Food cost % | Margin per plate |
|---|---|---|---|---|
| Vegetable curry | $10.95 | $1.80 | 16.4% | $9.15 |
| Chicken curry | $12.95 | $2.55 | 19.7% | $10.40 |
| Lamb curry | $18.95 | $6.40 | 33.8% | $12.55 |
The lamb dish has the highest food cost percentage — and also leaves the most dollars per plate. If it sells steadily and takes no more prep time than the others, it may be one of the most valuable items on the menu. Judging it on percentage alone would point the wrong way.
Step 5: Check it against your guests and your area
Costs give you the floor. Your guests and neighborhood set the ceiling. Before settling on a number, look at what similar dishes sell for nearby, how your portion and quality compare, and what your regulars are used to paying.
In our example, the formula suggested $8.23 but similar dishes nearby sell for $12–$15. Pricing at $12.95 keeps the dish good value while giving room to balance items that naturally run a higher food cost, like the lamb.
Takeout and delivery pricing
Off-premise orders carry costs a dine-in plate does not. Add packaging to the plate cost, and if a delivery platform keeps a commission, work out the margin on what you actually receive.
Some restaurants set separate prices for delivery menus to cover this. If you consider it, read your platform agreement for any pricing rules, and check whether your city or state has rules on delivery fees.
Keep prices current
- Re-cost a dish whenever a key ingredient changes price noticeably — proteins and oils move most.
- Review your top 10 sellers every quarter; they carry most of your food cost.
- Compare what you should have used (sales × recipe portions) with what you actually bought. A widening gap usually means portioning, waste or recording issues.
- When you raise a price, do it for a reason you could explain to a regular.
Quick checklist
- Every dish has a written recipe with portions
- Ingredient costs use yield, not purchase weight
- Batch items (sauces, rice, dough) are costed once, per ounce or portion
- Takeout plates include packaging
- Your food cost target comes from your own labor, overhead and profit goals
- Top sellers are checked for dollar margin, not only percentage
- Prices are re-checked when supplier prices move