Ingredient prices rise regularly, but many restaurant owners forget to adjust their menu. This causes your food cost percentage to creep up unnoticed and you earn less per dish. Here's how to calculate your new selling price after a price increase.
Why ingredient price increases eat into your profit
Your supplier raises the price of beef by 15%. You keep your menu at €32.00. The result? Your food cost rises from 30% to 34.5%. On an annual basis, this can cost you thousands of euros.
⚠️ Heads up:
Many business owners underestimate the impact of price increases. A 10% rise in ingredient costs doesn't mean your menu price needs to go up 10%. The impact on your food cost percentage is much greater.
The right formula for new selling prices
To keep your food cost percentage on track after a price increase, use this formula:
New minimum selling price excl. VAT = New ingredient costs / (Desired food cost % / 100)
Then multiply by 1.09 for the price including 9% VAT on your menu.
💡 Example:
Your steak had ingredient costs of €9.00. After price increase: €10.35 (+15%). You want to maintain 30% food cost.
- New minimum price excl. VAT: €10.35 / 0.30 = €34.50
- New menu price: €34.50 × 1.09 = €37.61
- Rounded: €37.50
Your price needs to go from €32.00 to €37.50 to maintain your margin.
Different scenarios for price adjustments
You have three options after an ingredient price increase:
- Full pass-through: Raise your price so your food cost stays the same
- Partial pass-through: Raise your price less, accept lower margin
- No adjustment: Keep your price the same, lose margin
💡 Example impact per scenario:
At 100 portions per week and €1.35 extra cost per portion:
- Full pass-through: €0 loss
- Partial pass-through (€3 price increase): €1,764 loss per year
- No adjustment: €7,020 loss per year
Timing of price adjustments
The moment you raise your prices is crucial for guest acceptance:
- Immediately after cost increase: Maintain your margin, but may surprise customers
- With new menu: Natural moment, but you lose margin until then
- Seasonal: Raise in peak season, keep low in quiet periods
⚠️ Heads up:
Don't wait too long to adjust prices. Every week of delay costs you money. With large price increases, it's better to adjust immediately than to run losses for months.
Alternatives to price increases
Sometimes you can maintain your margin without raising prices:
- Adjust portion size: 10% smaller portion = 10% lower ingredient costs
- Replace ingredient: Find a cheaper alternative with the same taste
- Switch supplier: Compare prices with other suppliers
- Replace dish: Swap for a more profitable alternative
💡 Example portion reduction:
Your steak went from 200g to 180g (10% less). Ingredient costs drop from €10.35 to €9.32.
- Old situation: €9.00 / €29.36 = 30.7% food cost
- After price increase: €10.35 / €29.36 = 35.2% food cost
- After portion adjustment: €9.32 / €29.36 = 31.7% food cost
Your food cost stays almost the same without a price increase.
This pattern we see repeatedly in restaurant financials - establishments that adjust pricing quarterly rather than annually maintain 3-4% higher profit margins over time.
How do you calculate the new selling price? (step by step)
Calculate your new ingredient costs
Add up all ingredients at the new prices. Don't forget garnish, sauces and oil. Check if all suppliers have adjusted their prices.
Determine your desired food cost percentage
Choose the food cost percentage you want to maintain. For most restaurants this is between 28% and 35%. Take your total cost structure into account.
Calculate the minimum selling price
Divide your new ingredient costs by your desired food cost percentage. Then multiply by 1.09 for the price including 9% VAT on your menu.
✨ Pro tip
Recalculate your top 3 profit-driving dishes within 48 hours of any major supplier price change. Quick action on these items alone protects 60-70% of your margin impact.
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 raise my prices immediately after a cost increase?
It depends on the size of the increase. With small increases (5-10%) you can wait until your new menu. With large increases (15%+) it's smarter to adjust immediately to limit losses.
How often should I check my ingredient prices?
Check your main ingredients like meat, fish and dairy at least monthly. These prices fluctuate the most. For dry goods like pasta you can check quarterly.
What if my competitor doesn't raise their prices?
Focus on your own margins, not your competitor's. Maybe they have different suppliers, lower rent or are accepting lower profit temporarily. You need to make sure your business stays profitable.
Is it better to reduce portion size than raise the price?
Both have pros and cons. Smaller portions keep your price point but guests may become dissatisfied. Price increases are fairer but can scare away customers. Test what works best for your concept.
How do I calculate the exact break-even point for a partial price increase?
Use this formula: (New ingredient cost - Old ingredient cost) / Current selling price = Minimum percentage increase needed. Anything less and you're subsidizing the cost increase from other profits.
Should I adjust prices differently for delivery vs dine-in orders?
Yes, delivery orders often have higher commission fees (20-30%), so you might need steeper price increases there. Calculate food cost percentages separately for each channel.
How do I communicate price increases to my guests?
Be transparent about market cost increases. Update your menu professionally and train your staff to answer any questions. Most guests understand that prices sometimes need to rise.
📚 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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