Your menu prices determine whether you make a profit or loss. Most restaurant owners throw numbers at the wall, watching cash disappear without understanding why. Use this formula to see if your prices actually cover what you spend.
The three pillars of your cost price
Your menu price needs to cover three things: ingredients (food cost), fixed expenses (rent, staff) and profit. Skip any one of these, and you're operating at a loss.
💡 Example:
You sell a steak for €32.00 (incl. 9% VAT):
- Selling price excl. VAT: €29.36
- Ingredients: €10.50
- Food cost: 35.8%
This leaves almost nothing for rent and profit.
Step 1: Calculate your actual food cost
Your food cost shows what percentage of your selling price goes to ingredients. The formula:
Food cost % = (Ingredient costs / Selling price excl. VAT) × 100
⚠️ Note:
Always calculate with the price EXCLUDING VAT. Your menu shows prices with VAT included. For restaurants, that's 9%.
Add up every ingredient that touches the plate:
- Main ingredients (meat, fish, vegetables)
- Garnishes and side dishes
- Sauces and dressings
- Oil, butter, salt, spices
- Bread, decoration—everything you serve
Step 2: Check your fixed costs per dish
Besides ingredients, you've got fixed expenses that need covering. Calculate how much each dish should contribute to rent, staff and other costs.
💡 Example calculation:
Monthly fixed costs: €15,000
- Rent: €4,000
- Staff: €8,000
- Energy, insurance, etc.: €3,000
At 1,500 covers per month: €15,000 / 1,500 = €10 per dish
This €10 must come from every portion sold to cover your fixed expenses, on top of ingredient costs.
Step 3: Determine your minimum selling price
Now you can calculate what you need to charge at minimum:
Minimum price = (Ingredient costs + Fixed costs per portion) / (1 - Profit margin %)
💡 Complete example:
Steak with ingredients costing €10.50:
- Ingredients: €10.50
- Fixed costs: €10.00
- Desired profit: 15%
Minimum price: (€10.50 + €10.00) / 0.85 = €24.12 excl. VAT
On the menu: €24.12 × 1.09 = €26.29 incl. VAT
Check: Do your prices fit the market?
Your price must cover costs AND stay competitive. Check what similar places charge for comparable dishes. This is the kind of thing you only learn after closing your first month at a loss—market research isn't optional.
- Visit 3-5 comparable restaurants in your area
- Check their menus online
- Pay attention to portion sizes and quality
- Compare the entire experience, not just price
⚠️ Note:
If you're much more expensive, you need to justify why. Better quality, larger portion, unique preparation or atmosphere.
Adjust your prices regularly
Review your prices at least every 6 months. Ingredient prices climb, rent increases, wages get adjusted.
Signs that you need to revisit your prices:
- Your supplier raises their prices
- Your rent or staff costs increase
- Your food cost creeps above 35%
- You're making less profit despite a packed restaurant
- Competitors adjust their prices
With a food cost calculator, you see your food cost per dish instantly and can quickly calculate what price changes mean for your profit.
How do you check if your prices are correct? (step by step)
Calculate your actual ingredient costs
Add up all the costs of ingredients that go on the plate. Don't forget garnishes, sauces, oil and spices. Calculate with current purchasing prices.
Determine your fixed costs per portion
Divide your monthly fixed costs (rent, staff, energy) by the number of covers per month. This is what each portion should contribute.
Calculate your minimum selling price
Add ingredient and fixed costs, divide by (1 - desired profit margin). Multiply by 1.09 for the price incl. VAT on your menu.
✨ Pro tip
Run this formula on your 8 highest-volume dishes every 45 days. These items drive most of your revenue, so getting their pricing wrong kills your monthly margins faster than anything else.
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 percentage of food cost is normal for a restaurant?
Most restaurants run between 28% and 35% food cost. Above 35% it gets tough to turn a profit after fixed costs. Fine dining can sometimes push 40% if they charge premium prices.
How do I factor in trimming loss in my cost price?
Divide your purchase price by the yield percentage. With 20% trimming loss you have 80% yield: €10/kg becomes €10/0.80 = €12.50/kg actual price. Don't forget cooking shrinkage too.
Should every portion contribute equally to fixed costs?
Not necessarily. Popular dishes can contribute more, slower movers less. What matters is that the total covers your fixed costs. Some restaurants use loss leaders to drive traffic, but you need to know you're doing it.
📚 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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