Food Cost: what it is and how to use it in pricing
Food cost is a dish's ingredient cost divided by its selling price; it is the per-dish version of COGS and guides how much to charge to protect margin.
How to calculate food cost
Add the cost of every ingredient in the recipe and divide by the selling price. Example: a dish that costs $12 in ingredients and sells for $40 has a 30% food cost.
- Food cost % = ingredient cost ÷ selling price × 100
- Common target: 25%–35% per dish
- Basis for setting a price with margin
Food cost and menu engineering
Crossing food cost with each item's popularity reveals which dishes deliver both margin and volume. That's the basis of menu engineering: promote what sells and is profitable, fix what isn't.
FAQ
Is food cost the same as COGS?
They're related: food cost is usually measured per dish, and COGS is the aggregate ingredient cost for the period.
What food cost is considered good?
Generally 25%–35% per dish. Much lower can mean a high price; much higher means a tight margin.
How does food cost help with pricing?
By setting a target food cost, you calculate the minimum selling price that covers cost and delivers the margin you want.