What happens to your profit margins when ingredient costs spike but menu prices stay frozen? You'll need to adjust your selling price to maintain the same food cost percentage. Most restaurant owners wing it with gut instincts, but your margins deserve better math.
Why you need to adjust your selling price
If your ingredients become more expensive but your menu price stays the same, your food cost percentage goes up. That means less profit per dish. Sometimes even a loss.
💡 Example:
Your pasta carbonara cost €8.50 in ingredients. Selling price €28.00 incl. VAT.
- Old food cost: (€8.50 / €25.69) × 100 = 33.1%
- Supplier raises prices by 15%
- New ingredient costs: €8.50 × 1.15 = €9.78
- Food cost is now: (€9.78 / €25.69) × 100 = 38.1%
You lose 5 percentage points of profit per plate!
The formula for new selling price
To keep your food cost percentage the same, use this formula:
New selling price excl. VAT = New ingredient costs / (Desired food cost % / 100)
Then multiply by 1.09 for the price including 9% VAT.
💡 Example calculation:
New ingredient costs: €9.78. Desired food cost: 33%
- Step 1: €9.78 / 0.33 = €29.64 excl. VAT
- Step 2: €29.64 × 1.09 = €32.31 incl. VAT
Your new menu price is €32.31 (was €28.00)
⚠️ Note:
Always calculate first excl. VAT and then add VAT. Otherwise your calculation won't be correct.
Timing your price adjustments
You don't need to pass on every supplier price increase. Here's what I've seen from tracking this across dozens of restaurants:
- For increases of 10% or more: Always pass it on
- For increases of 5-10%: Check your top-selling dishes first
- For increases under 5%: You can absorb this in your margin
Focus on your 5 best-selling dishes. If those are doing well, you've solved 80% of your problem.
Alternative strategies
Sometimes you don't want to raise your menu price. Then you have other options:
- Reduce portion size: 10% less meat = 10% lower food cost
- Replace ingredient: Replace expensive fish with a cheaper alternative
- Adjust garnish: Fewer expensive side dishes
- Switch supplier: Compare prices with other suppliers
💡 Example portion adjustment:
Your steak of 250 grams becomes 220 grams (12% smaller).
- Old meat costs: €6.00 per portion
- New meat costs: €6.00 × 0.88 = €5.28 per portion
- Savings: €0.72 per plate
Often the guest won't even notice the difference.
Impact on annual basis
A price increase seems small, but it adds up. Always check the impact on an annual basis:
💡 Example annual impact:
You sell 2,000 pastas per year. Ingredients rise from €8.50 to €9.78.
- Extra costs per portion: €1.28
- Extra costs per year: €1.28 × 2,000 = €2,560
If you don't adjust your price, you lose €2,560 in profit per year.
How do you calculate your new selling price? (step by step)
Calculate your new ingredient costs
Add up all ingredients of your dish at the new purchase prices. Don't forget the garnish, sauces and oil. Note the total amount per portion.
Determine your desired food cost percentage
Choose the food cost percentage you want to maintain. For restaurants, 28-35% is standard. Use the same percentage as for the price increase.
Calculate the new selling price excl. VAT
Divide your new ingredient costs by your desired food cost percentage. For example: €10.00 / 0.30 = €33.33 excl. VAT.
Add VAT for your menu price
Multiply by 1.09 for 9% VAT. In the example: €33.33 × 1.09 = €36.33 incl. VAT. This becomes your new menu price.
✨ Pro tip
Recalculate your 8 highest-volume dishes every 6 weeks during volatile pricing periods. These dishes drive most of your revenue, so getting their margins right protects your bottom line faster than tweaking everything at once.
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
Do I need to pass on every supplier price increase?
Not always. For increases under 5% you can often absorb it in your margin. For 10% or more you always need to pass it on to stay profitable.
Can I lower my food cost percentage instead of raising my price?
Yes, by using smaller portions, cheaper ingredients or less expensive garnish. But be careful that your quality doesn't suffer too much.
How often should I check my prices?
Check your prices at least every 3 months. During strong inflation or with seasonal products, monthly might be better.
What if my competitor doesn't raise their prices?
Check if their food cost was already higher, or if they have different suppliers. You can't sell below your cost price without making a loss.
Should I include VAT in my food cost calculation?
No, always calculate excl. VAT. The VAT is for the tax authority, not for your cost price. Otherwise your food cost will appear lower than it actually is.
How do I handle partial ingredient increases in complex dishes?
Calculate the new total ingredient cost for the entire dish, then apply the formula. Don't try to adjust prices for individual ingredients separately.
📚 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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