Calculating Menu Items Cost 9 Steps

By: chef ssentongo

Calculating the cost of menu items is essential for pricing, profitability, and inventory management. Here’s a 9-step process to accurately determine your menu item costs:

1. List All Ingredients

• Break down every component of the dish (including garnishes, sauces, and sides).
• Example: A burger includes bun, patty, cheese, lettuce, tomato, condiments, etc.

2. Determine Purchase Price

• Record the cost of each ingredient as purchased (e.g., a 10-pound bag of potatoes for $5).

3. Convert to Edible Portion Cost (EP Cost)

• Account for waste (peels, trimming, bones).
• Example: A 10-lb chicken may yield only 7 lbs after deboning.
• Formula:
  EP Cost = Purchase Price / Yield Percentage (e.g., $10 / 70% yield = $14.29 usable cost)

4. Calculate Cost per Unit

• Convert bulk pricing to smaller units (per ounce, gram, slice, etc.).
• Example: A $5, 10-lb bag of potatoes costs $0.50 per pound or $0.03 per ounce.

5. Measure Ingredient Quantities per Dish

• Weigh/measure exact amounts used in each recipe.
• Example: Burger uses 6 oz of beef, 1 oz of cheese, 0.5 oz of ketchup.

6. Multiply Quantity by Unit Cost

• Example:
  • 6 oz beef at $0.50/oz = $3.00
  • 1 oz cheese at $0.20/oz = $0.20
  • 0.5 oz ketchup at $0.10/oz = $0.05

7. Sum Total Ingredient Costs

• Add all component costs for one serving.
• Example: $3 (beef) + $0.20 (cheese) + $0.05 (ketchup) + … = $4.25 total cost.

8. Factor in Indirect Costs (Optional but Recommended)

• Include overhead like labor, utilities, and packaging if desired.
• Example: Add 10% overhead ($4.25 × 1.10 = $4.68).

9. Set Menu Price Using Food Cost Percentage

• Divide total cost by your target food cost % (typically 20–35%).
• Formula:
  Menu Price = Total Cost / Target Food Cost % (e.g., $4.68 / 30% = $15.60)

Pro Tips:

• Update costs regularly (prices fluctuate!).
• Use a spreadsheet or restaurant management software (e.g., Excel, Restaurant365).
• Track waste and adjust portions to optimize profitability.

By following these steps, you’ll ensure accurate pricing and maintain healthy profit margins. Would you like a free template to calculate this automatically?

How to Write a Restaurant Profitable Menu

Creating a profitable restaurant menu requires strategic pricing, psychology, and cost control. Here’s a step-by-step guide to designing a menu that maximizes revenue while keeping customers happy.

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1. Analyze Food Costs & Profit Margins

• Calculate the cost of each dish (ingredients, labor, overhead).
• Aim for a target food cost percentage (typically 25-35% for full-service restaurants, 20-25% for fast casual).
• Use this formula to set prices:
  Menu Price = Ingredient Cost / Target Food Cost % (Example: $3 food cost ÷ 30% = $10 menu price)

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2. Categorize Menu Items by Profitability & Popularity

• Use the “Menu Engineering Matrix” to classify dishes: High Profit Low Profit Popular Stars ⭐ (Promote!) Plow Horses 🐴 (Reprice/Reconfigure) Unpopular Puzzles ❓ (Reposition) Dogs 🐶 (Remove)
• Focus on “Stars” (high-profit, high-demand items).

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3. Use Strategic Menu Layout & Design

• Eye-Tracking Tips:
  • Customers scan menus in a “Z-pattern” (top-left → top-right → middle → bottom-left → bottom-right).
  • Place high-profit items in the top-right corner (where eyes linger).
• Highlight Profit Makers:
  • Use boxes, icons, or bold text to draw attention to high-margin dishes.
• Avoid Dollar Signs ($) (psychologically makes customers spend less).

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4. Implement Psychological Pricing Tactics

• Charm Pricing: End prices with .95 or .99 ($12.99 feels cheaper than $13).
• Decoy Pricing: Add a high-priced item to make others seem reasonable (e.g., a $50 steak makes the $35 option look like a deal).
• Bundle Deals: Pair high-margin items with low-cost sides (e.g., $18 burger + fries + drink).

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5. Optimize Descriptions to Increase Perceived Value

• Use sensory words (e.g., “slow-roasted,” “handcrafted,” “farm-fresh”).
• Example:
  • ❌ “Grilled Chicken”
  • ✅ “Herb-Marinated Grilled Chicken with Garlic Infusion”

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6. Limit Choices to Reduce Decision Fatigue

• 7-10 items per category (appetizers, mains, desserts) is ideal.
• Too many options overwhelm customers and increase kitchen costs.

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7. Adjust Portion Sizes Strategically

• Reduce portions slightly on high-cost items (e.g., steak) to maintain margins.
• Increase portions on low-cost, high-markup items (e.g., pasta, fries).

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8. Test & Update the Menu Regularly

• Seasonal Menus: Rotate dishes to keep costs low (use in-season ingredients).
• A/B Testing: Try different layouts/prices to see what sells best.
• Remove Underperformers: Replace “Dogs” (low-profit, low-sales items).

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9. Train Staff to Upsell High-Margin Items

• Encourage servers to recommend:
  • Specials (often high-margin).
  • Add-ons (e.g., “Would you like truffle fries for $2 more?”).
  • Premium drinks (alcohol, specialty coffees).

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Bonus: Use a Menu Engineering Template

Track profitability with a simple spreadsheet: ItemCostPriceFood Cost %PopularityCategory Burger $3.00 $12.00 25% High Star ⭐ Salad $2.50 $8.00 31% Low Plow Horse 🐴

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Final Tip:

A profitable menu balances customer appeal and cost control. Regularly review sales data, adjust pricing, and keep testing for the best results.

Would you like a free menu engineering template to analyze your dishes? 🚀