How to Cost a Menu

How to Cost a Menu

How to Cost a Menu

One of the questions that many chefs ask is: “How do I calculate food cost?”  Many involved in restaurant management will often shy away from getting involved with this area of the business as they have never been taught how to cost a menu or even how to calculate a Gross Profit (GP). However it is essential that a good business chef knows and understands the fundamentals of plate cost, food cost percentage and food cost formula. This is the difference between a CHEF and a COOK, chefs are (and must be!) interested in how their restaurants make or lose money.

Recipe Cost Calculator – How to calculate food cost for a recipe

Food costing from KitchenCut.com

A restaurant menu, indeed each menu item, is written and costed inclusive of any food waste.

This total of the individual ingredients gives up the COST PRICE. The price you sell the dish at is the SELLING PRICE, which will have VAT included (currently set at 20% in the UK but will vary according to location).

To find the true selling price the VAT must be removed.

Food cost definition

The actual food cost % is then calculated by dividing the COST PRICE by the SELLING PRICE and multiplying by 100 as in the equation above.

Example:

Assume the Cost Price is £2.00 and the Selling Price is £12.00

To remove the tax (20%) from the selling price, divide by 1.2 * (see notes on VAT below)

KC example indiv

So the Selling Price (less VAT) = £10.00

Food cost calculations – how to calculate food cost per meal

In this case, take the cost of the food and divide it by the percentage food cost you wish to achieve, multiply by 100 to find the selling price and add the VAT.

Example:

To achieve food cost of 15%:

KC example food cost

Calculating Food Cost Percentage on a Monthly Basis – food cost formula

Food costs on a monthly or even weekly basis is also useful.  Total food cost is the sum of all food purchases from suppliers less any returns / credits you are owed.

The variance in stock value is either added or subtracted according to the stock take figures. This value of the stock is the difference between the opening stock at the beginning of the period and the closing stock at the end. If the value of the stock is greater ie, there is an increase in the value of the stock you are holding, then this amount is subtracted from the food cost. If the figure is less ie, you have used some of the stock you were holding, the cost of this must be added to the food cost.

Total food revenue is the total food sales over any given period, less the VAT.

Example:

Presuming the VAT figure is still 20%

monthly-example

RELATED ARTICLE- How can a Restaurant consultant help your business?

What is Gross profit %

gross-profit

How to calculate my Gross Profit – food cost formula

Presume the VAT is still at 20%

my-gross-profit

Calculating Gross Profit % over a month?

As before allowances need to be made for any variances in your stock levels.

my-gross-profit-month

VAT/TAX

In the UK, the Government put a tax called VAT on to the selling price of any food dish.

This % is not fixed but varies with the Government of the day, currently it is set at 20%. This % needs to be added to your menu prices.

Different countries have different TAX rates and calculations should be carried out using the appropriate level of tax, possibly even none. In some countries the TAX is ONLY added on when guests are presented with the bill/check, therefore the TAX rate is not include in the selling price.

At its current rate of 20%, to remove VAT from an item divide by 1.2. To add VAT x 1.2. Should this rate change, the calculation must change. For example, if the TAX rate is 15%,

To remove 15% TAX Divide number by 1.15

To add TAX at 15% Multiply by 1.15

CREDIT –Kitchen Cut

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Lumiere Consultancy pulls together a team of individuals that have  worked and operated restaurants in the UK and internationally.  Our experience spans from private dining events, high end dining  and we also work with deli’s and smaller eateries too.

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