Verify your prices cover costs by calculating contribution margins (aim for 65-72%) and food costs (target 28-35%). Check your top 10 dishes monthly and adjust immediately after supplier price increases.
Great restaurants price their dishes based on cold, hard numbers while struggling ones rely on guesswork and competitor watching. The difference between these approaches can mean thousands in lost profits each month. Here's how to verify your prices actually cover what you're spending.
Gather all cost price information
You need three numbers to do this right: ingredient costs, operational expenses, and your target profit margin. Focus on your top sellers first - fix those dishes and you'll solve most of your profitability issues.
💡 Example: Steak check
You sell a steak for €32.00 (incl. 9% VAT):
- Selling price excl. VAT: €29.36
- Steak 250g: €6.50
- Sides and sauce: €2.80
- Total ingredient costs: €9.30
Food cost: (€9.30 / €29.36) × 100 = 31.7%
Calculate your break-even point
Break-even is where you cover all expenses but don't make a dime in profit yet. This includes ingredient costs plus your fixed expenses per portion - things like wages, rent, and utilities. Most restaurants hit break-even between 65-75% of their selling price.
- Ingredient costs: 28-35% of selling price
- Staff costs: 25-35% of selling price
- Other costs: 10-15% of selling price (rent, energy, depreciation)
- Profit: 5-15% of selling price
⚠️ Note:
Always work with prices excluding VAT. Your menu shows prices with VAT, but cost calculations need the VAT-free amount.
Test your prices with the contribution margin formula
The contribution margin reveals how much money each dish contributes toward covering your fixed costs and generating profit after you subtract ingredient expenses. You want this number between 65-72%.
Formula: Contribution margin = ((Selling price excl. VAT - Ingredient costs) / Selling price excl. VAT) × 100
💡 Example: Contribution margin calculation
Steak at €29.36 excl. VAT with €9.30 ingredient costs:
- Contribution: €29.36 - €9.30 = €20.06
- Contribution margin: (€20.06 / €29.36) × 100 = 68.3%
This is healthy - €20.06 remains for staff, rent and profit.
Check your weakest dishes
Don't just analyze your bestsellers. Look at dishes that barely move too - they might be priced wrong or cost too much to make. Create a spreadsheet of your 10 most-ordered items and run the numbers on each one. This is a pattern we see repeatedly in restaurant financials: owners focus on popular dishes while money-losing items quietly drain profits.
- Food cost above 35%: Raise price or lower ingredient costs
- Contribution margin below 60%: Dish is probably losing money
- Dishes that don't sell: Check if the price is too high for the perceived value
💡 Example: Spotting problems
Pasta carbonara for €18.50 (€16.97 excl. VAT):
- Ingredient costs: €7.20
- Food cost: 42.4% (too high!)
- Contribution margin: 57.6% (too low!)
Action: Raise price to €21.50 or lower ingredient costs to €5.10
Create a monthly review routine
Costs shift constantly. Suppliers bump prices, labor costs climb, energy bills fluctuate. So you need to check your key dishes every single month.
Monthly checklist:
- Have suppliers increased any prices?
- Are portion sizes matching your recipes?
- Does your actual food cost hit your target?
- Which dishes are selling best this season?
How do you check if your prices cover your costs?
Calculate your actual ingredient costs
Add up all costs of ingredients that go on the plate: main product, sides, sauces, oil, butter and garnish. Don't forget anything and calculate with current purchase prices including trim loss.
Determine your selling price excluding VAT
Divide your menu price by 1.09 to get the price excluding 9% VAT. Use this price for all further cost price calculations.
Calculate food cost percentage
Divide your ingredient costs by your selling price excluding VAT and multiply by 100. A healthy food cost is between 28-35% for most restaurants.
Check your contribution margin
Subtract your ingredient costs from your selling price excl. VAT. This amount must cover your staff, rent, energy and profit. For restaurants this must be at least 65% of your selling price.
Adjust prices where needed
Dishes with food cost above 35% or contribution margin below 60% are costing you money. Raise the price, lower ingredient costs or remove the dish from the menu.
✨ Pro tip
Run a weekly spot-check on your three highest-volume dishes by weighing portions during service. Kitchen staff often serve heavier portions during busy periods, which can push your food costs up by 3-5% without you noticing.
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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
Should I include VAT in my cost price calculation?
No, always calculate with prices excluding VAT. Divide your menu price by 1.09 to get the price excl. VAT. Otherwise your food cost will appear lower than it actually is.
What is a healthy food cost for a restaurant?
For most restaurants, a healthy food cost runs between 28-35%. Fine dining can push slightly higher (up to 35%), while fast casual often runs lower (25-30%). Your concept and clientele determine where you should land.
How often should I check my prices?
Review your bestsellers monthly and adjust immediately after supplier price increases. Run a complete menu analysis every quarter.
What if my competitor charges less?
First verify your own numbers are correct. Your competitor might have lower costs, smaller portions, or accept thinner margins. Don't copy blindly - stick to your own financial reality.
Should I include all costs in my selling price?
Absolutely. Your selling price must cover ingredients, labor, rent, utilities and profit. Focus only on ingredient costs and you're ignoring 70% of your actual expenses.
How do I calculate trim loss in my cost price?
Divide your purchase price by the yield percentage. With 20% trim loss you have 80% yield, so €10/kg becomes €10 ÷ 0.80 = €12.50/kg actual cost.
What do I do with seasonal products?
Calculate an average price across the entire season or adjust your menu seasonally. Partner with suppliers who can lock in prices for specific periods.
📚 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
- Warenwetbesluit Bereiding en behandeling van levensmiddelen (2024) — Official source
- WHO — Foodborne diseases estimates (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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