12 Jul How to cost your dishes and recipes from your restaurant menu
Menu costing will give us the cost of every dish of our restaurant menu, our potential gross profit margin, and will help us set up prices that will make your restaurant profitable.
Here is a video showing how to cost your dishes and recipes of your menu. We will leave you the formulas on how to calculate dish cost and gross profit margin below. This is how we do it with our template, but you can create your own, or use software. The idea of this video is that you understand the basics on how to do it. We hope this helps 🙂
You can get the menu costing and stock take template here:
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*Terms and Conditions. Please note the spreadsheet is our intellectual property and the sheets are protected to ensure integrity of the system. This spreadsheet is part of our consultancy services and is usually priced higher as it includes individual training and maintenance. Due to high demand, we have managed to make videos so users can “train themselves” to use it. If you find any error in the 24 hours after purchase, we will check it immediately and at no cost. However, any other support will be charged as consultancy.
As we mentioned in other blog the cost of goods sold (COGS) and the staff cost (Prime Cost) represent the highest costs in a restaurant, often reaching more than 60% of the turnover, so having these costs under control is CRUCIAL to restaurant MANAGEMENT.
Cost of Goods = Initial Stock + Purchases – Transfers received + Transfers issued – Final Stock
So this would give us the real cost of goods at a restaurant, however, we would not be able to know what is the potential cost of our dishes.
You might be very happy because your food cost is 27% of your sales, however, your menu may have the potential of having a cost of goods sold of 20%. So really there is a big difference between the profits that you could make at your restaurant and what you are really making.
Let’s start with the main concepts:
The COST PRICE of a dish is the total of the ingredients that you need to produce that dish.
The SELLING PRICE is the amount that customers will pay for that dish at the restaurant and it includes VAT (in the UK)
The NET SELLING PRICE is the amount that we need to consider to understand our real Gross Profit and Cost per dish. It is the Selling price with the VAT removed. As the amount of VAT collected from customers will be paid to HMRC, it is very important to remove the VAT in our calculations.
Let’s see it with an example.
Burger cost £2.50
The Selling Price is £12 (VAT is 20%)
The Net Selling price is £10 (£12/(1+0.20)) Formulas:
Costing in percentage is 25% (2.5/10) c/p= costing (%)
Gross Profit Margin in percentage is 75% GP (%) = (1- (c/p))
RECOMMENDED READ: Why is inventory important for your restaurant