Menu Costs: How to Find the Dishes Losing You Money

Menu costs are what each dish on your menu costs to make, based on the price of every ingredient on the plate at today's supplier prices. You work out a dish's cost by pricing each ingredient from your latest invoice, accounting for yield and wastage, and adding the lines into one number. Divide that number by the menu price and you get the dish's food cost percentage. Because supplier prices keep moving, a menu cost is only accurate on the day you calculate it, which is why most operators recost regularly rather than once at launch.

Divide the dish's total ingredient cost by its menu price, then read the result as a percentage. If a burger costs $4.20 to make and sells for $14.00, its food cost is 30%. The cost side must include every ingredient on the plate, priced from your latest invoice, plus an allowance for yield and wastage, because you buy more than you serve. The menu price is what the customer pays before tax. Run the same sum for every dish, and you can rank them from the cheapest to make to the ones losing money.

Menu costs change because supplier prices keep moving after you launch a dish. A supplier price that changes often changes again within a few weeks, so each rise lifts the cost of any dish that uses that ingredient. The recipe and the menu price stay the same, so the margin shrinks without anyone touching the dish. A dish that ran a 30% food cost at launch can cost well over that a few months later. This is why a one-off costing goes stale, and why operators recost from current prices rather than once a year.

A good food cost percentage is usually around a third of the menu price, though the right target depends on your concept, your location and the dish. A quick-service burger and a fine-dining main will not share the same target, so set one per dish or per category rather than one number for the whole menu. What matters more than an exact figure is the gap between a dish's target and where it sits today. If a dish sits a few points above its target, reprice or re-spec it before you lose more margin.

Update recipe costs whenever the price of an ingredient changes, not on a fixed quarterly schedule. Supplier prices move often, so a quarterly or annual recost leaves most of your dishes priced on figures that are months out of date. The practical way to do this is to recost automatically from each received invoice, so a dish's cost reflects what you actually paid this week. If you recost by hand, prioritise your highest-selling dishes and anything with a volatile main ingredient, such as meat, fish or dairy. Those are where a stale cost does the most damage.

Start with the dishes whose food cost sits furthest above their target. Reprice a dish that is only a few points over, where the market will bear a small rise. Re-spec a dish where one or two ingredients carry most of the cost, by swapping a cut, changing a supplier or trimming the portion. Re-engineer or drop a dish that loses money however you price it. Sort every dish by its food cost percentage first, because the ones quietly selling below cost are rarely the ones you would guess, and they cost you on every order.

Supy recosts your recipes automatically from each received invoice, so a dish's cost reflects the price you actually paid. When a supplier price changes, every recipe that uses that ingredient updates, and Supy flags any recipe that goes over its food cost target. The same recipe library and targets apply across every site, so a change at the central kitchen shows at each branch. Instead of a quarterly spreadsheet pass, your costs stay current on their own, and you spend your time acting on the dishes that need it rather than rebuilding the numbers.