How often do you cost your menu items? Menu costing allows for proper pricing and inventory management.
Start by calculating the cost to produce the menu item. Obtain a menu item's recipe list and determine the cost for each ingredient.
Once you determine the menu item's cost, you can more effectively determine price.
Menu prices can be based on a combination of the following factors:
- Food cost percentage – On average, food costs range between 27% – 33%. Full-service restaurants are on the higher end of the range, while fast casual tend to be on the lower end.
- Desired profit margins – Margins (e.g. $10 margin on a main entrée) can be used for higher cost food items.
- Competitor's prices – Prices should be comparable to competitor's prices.
It is recommended that restaurants calculate the cost of menu items at least twice a year in order to respond to changing food costs.
The benefits of recipe costing include:
- Improved profitability due to properly priced menu items;
- Improved control over inventory management; and
- A better handle on your menu items' costs and sales mix, which can lead to efficiency in maintaining efficient inventory levels.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
