Should you guess at price increases or calculate them precisely? Most restaurant owners estimate and end up losing profit. Here's the exact formula to determine how much your menu prices need to increase.
The formula for price increases
The formula to calculate your new selling price is:
New selling price = Old selling price × (1 + (Cost increase % / (100 - Desired margin %)) × 100)
Looks complex, but an example makes it crystal clear.
? Example:
You sell a steak for €32.00 (incl. 9% VAT) with a food cost of 30%.
- Current selling price excl. VAT: €29.36
- Current ingredient costs: €8.81
- Your supplier raises meat by 15%
- New ingredient costs: €10.13
New minimum selling price: €10.13 / 0.30 = €33.77 excl. VAT = €36.81 incl. VAT
Step-by-step calculation
Breaking this down into manageable steps:
- Calculate your current ingredient costs per dish
- Work out what the new ingredient costs will be
- Divide by your desired food cost percentage
- Compare with your old price
? Practical example:
Restaurant with pasta carbonara:
- Old ingredient costs: €5.20
- Old selling price: €18.50 incl. VAT (€16.97 excl. VAT)
- Old food cost: 30.6%
- Supplier raises cheese and cream by 20%
- New ingredient costs: €5.80
New price for same margin: €5.80 / 0.306 = €18.95 excl. VAT = €20.65 incl. VAT
What happens if you can't pass on all costs
Sometimes you can't raise prices without losing customers. You've got three options:
- Partial pass-through: Raise your price by, say, 50% of the cost increase
- Compensate with other dishes: Keep this dish stable, raise others more
- Adjust the recipe: Use cheaper ingredients or smaller portions
⚠️ Watch out:
If you don't pass on cost increases, your margin automatically drops. With a 15% cost increase and no price increase, a 30% food cost becomes 34.5%. That can cost you thousands of euros per year.
Calculate different scenarios
Always work through multiple scenarios to see the real impact. This is the kind of thing you only learn after closing your first month at a loss - every percentage point matters more than you think.
? Scenario analysis:
Dish with €8.00 ingredient costs, selling price €28.00 incl. VAT:
- Scenario 1 - Full pass-through: new price €32.20
- Scenario 2 - 50% pass-through: new price €30.10, food cost rises to 33%
- Scenario 3 - No pass-through: price stays €28.00, food cost rises to 36%
At 100 portions per week, this makes a difference of €2,080 per year between scenario 1 and 3.
Tools that help with calculations
Manually recalculating for each dish eats up valuable time. A food cost calculator automatically shows what your new prices should be when purchase prices change. You immediately see the effect on your food cost and can compare different scenarios.
This becomes especially helpful with suppliers who regularly adjust prices - then you can quickly decide which dishes you adjust and which you leave as they are for now.
Related articles
How do you calculate the new selling price? (step by step)
Calculate current ingredient costs per dish
Add up all the ingredients that go into the dish. Also include garnishes, sauces and oil. This is your starting point for the calculation.
Work out new ingredient costs
Multiply the ingredients that have gone up in price by the increase percentage. Add this to the ingredients that haven't changed in price.
Divide by desired food cost percentage
Divide the new ingredient costs by your desired food cost (for example 0.30 for 30%). This gives you the new minimum selling price excl. VAT.
Add VAT for menu price
Multiply by 1.09 for 9% VAT on food. This is the price that should appear on your menu to maintain the same margin.
✨ Pro tip
Track your 8 highest-volume dishes every 6 weeks for supplier price changes. These menu items drive 60-70% of your food costs, so missing an increase here hits your bottom line hardest.
Calculate this yourself?
In the KitchenNmbrs app you can do this in just a few clicks. 7 days free, no credit card.
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Frequently asked questions
What if customers complain about price increases?
Should I use the same margin for every dish on my menu?
How do I handle suppliers who change prices multiple times per year?
Sources consulted
- EU Verordening 852/2004 — Levensmiddelenhygiëne (2004) — Official source
- EU Verordening 853/2004 — Hygiënevoorschriften voor levensmiddelen van dierlijke oorsprong (2004) — Official source
- EU Verordening 1169/2011 — Voedselinformatie aan consumenten (2011) — Official source
- NVWA — Hygiënecode voor de horeca (2024) — Official source
- NVWA — Allergenen in voedsel (2024) — Official source
- Codex Alimentarius — International Food Standards (2024) — Official source
- FSA — Safer food, better business (HACCP) (2024) — Official source
- BVL — Lebensmittelhygiene (HACCP) (2024) — Official source
Food Standards Agency (FSA) — https://www.food.gov.uk
The HACCP standards shown in this application are for informational purposes only. KitchenNmbrs does not guarantee that displayed values are current or complete. Always consult the FSA or your local authority for the latest regulations.
Written by
Jeffrey Smit
Founder & CEO of KitchenNmbrs
Jeffrey Smit built KitchenNmbrs from 8 years of hands-on experience as kitchen manager at 1NUL8 Group in Rotterdam. His mission: give every restaurant owner control over food cost.
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