Converting cost price to selling price is a crucial step for every restaurant owner. Many entrepreneurs underestimate their prices, which causes them to lose money unintentionally...
Most restaurant owners believe pricing is just adding markup to ingredient costs. But this myth leads to underpriced menus and shrinking profits. The real formula involves food cost percentages, market positioning, and psychological pricing tricks.
The basic formula for selling price
The formula to convert cost price to selling price is straightforward:
Minimum selling price (excl. VAT) = Ingredient costs / (Desired food cost % / 100)
Then you add VAT for your menu price:
Menu price = Selling price excl. VAT × 1.09 (at 9% VAT)
💡 Example:
Your pasta carbonara has ingredient costs of €8.50 and you want a food cost of 30%.
- Minimum selling price excl. VAT: €8.50 / 0.30 = €28.33
- Menu price: €28.33 × 1.09 = €30.88
Rounded: €31.00 on the menu
Which food cost percentage should you choose?
The right food cost percentage depends on your type of business and overhead costs:
- Fine dining: 28-35% (more service, ambiance)
- Casual dining: 28-35% (balance between quality and price)
- Bistro/brasserie: 25-32% (efficient operation)
- Pizzeria: 20-28% (cheaper ingredients, high volumes)
Start with 30% as your baseline. Too high? You'll need to reduce ingredient costs or increase your selling price.
⚠️ Note:
Always calculate excluding VAT for your food cost calculation. Otherwise your margin will appear higher than it actually is.
Map out ingredient costs completely
For an accurate cost price, include EVERYTHING that goes on the plate:
- Main ingredients (meat, fish, vegetables)
- Side dishes and garnishes
- Sauces and dressings
- Oil, butter, spices
- Bread, decoration
💡 Steak example:
For a 200 gram steak you add up:
- Steak 200g: €6.40
- Fries 250g: €0.85
- Salad garnish: €0.45
- Pepper sauce 50ml: €0.65
- Butter, oil, spices: €0.35
Total cost price: €8.70
From cost price to competitive price
Your calculated price must also be competitive in your market. So research:
- What are comparable businesses charging? Visit 3-5 competitors
- What does your target audience accept? A bistro can charge different prices than a grand café
- What is your positioning? Premium ingredients justify higher prices
If your calculated price exceeds market rates, you have three options:
- Reduce your cost price (different supplier, smaller portions)
- Accept a higher food cost (lower margin)
- Adjust your positioning (towards premium)
💡 Practical example:
Your burger costs €7.20 in ingredients. At 30% food cost that becomes €26.18 on the menu. But competitors charge €22.50.
Options: reduce the portion to €6.20 (then it becomes €22.60) or accept 35% food cost on this dish.
Psychological pricing
The final step involves making your price psychologically attractive - something most kitchen managers discover too late affects customer ordering patterns:
- €X.95 or €X.50 feels cheaper than round amounts
- Avoid €X.99 in restaurants (too fast food-like)
- Group prices starters €8-12, main courses €18-26
- Anchor high put your most expensive dish at the top
Tools like KitchenNmbrs automatically calculate your minimum selling price per dish, preventing you from pricing below cost.
How do you calculate the right selling price? (step by step)
Calculate your complete cost price
Add up all ingredients that go on the plate: main product, side dishes, sauces, garnish and even the oil in the pan. Don't forget anything, because every cent counts.
Choose your desired food cost percentage
Start with 30% as a guideline. Fine dining can go to 35%, efficient concepts like pizza can go to 25%. This percentage determines your margin.
Calculate your minimum selling price
Divide your cost price by your food cost percentage. For example: €8.00 / 0.30 = €26.67 excluding VAT. Multiply by 1.09 for your menu price including VAT.
Check the market price
Compare with 3-5 competitors. Is your price much higher? Then your cost price needs to go down or food cost up. Is it much lower? Then you can probably charge more.
Apply psychological pricing
Round to €X.50 or €X.95 for a more attractive feel. Avoid round amounts and make sure your prices are logically grouped per category.
✨ Pro tip
Recalculate your 3 signature dishes every 6 weeks - these anchor your entire menu's profitability. If their margins slip, your restaurant's bottom line follows quickly.
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
Should I include VAT in my cost price calculation?
No, always calculate excluding VAT. Your food cost is ingredient costs divided by selling price excl. VAT. Otherwise your margin looks better than it actually is.
What if my calculated price is higher than the competitor's?
Then you have three options: lower your cost price (different supplier, smaller portions), accept a higher food cost, or adjust your positioning towards premium.
What food cost percentage is normal?
Between 28-35% for most restaurants. Pizzerias can go lower (20-28%), fine dining sometimes higher. Start with 30% as a guideline.
How often should I adjust my prices?
Check at least quarterly whether your cost prices are still accurate. Suppliers regularly raise prices. Adjust your menu if your food cost goes above 35%.
Do I need to keep the same food cost for all dishes?
No, you don't have to. Popular dishes can have a lower food cost (more profit), less popular ones a higher one. What matters is your average food cost.
How do I handle seasonal ingredient price fluctuations?
Build a 5-10% buffer into your calculations during peak season pricing. Switch to seasonal alternatives or adjust portions rather than constantly changing menu prices.
📚 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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