How to calculate food cost—and know when to change menu prices.

The delivery arrives, the chef signs the invoice, and lunch service starts as usual. The chicken curry looks the same. Guests pay the same price. Yet each plate now leaves less money to run the restaurant.

In our hypothetical example, chicken rises from €8.50 to €10.20 a kilogram. Ingredient cost per portion moves from €3.49 to €3.915, while the menu price stays at €15.40, including an illustrative 10% VAT. The restaurant loses €0.425 of ingredient contribution on each sale: €42.50 over 100 identical orders. Nothing has gone wrong in the dining room. The recipe calculation has simply fallen behind the invoice.

Before changing the menu, find out which part of the dish became more expensive, what that adds to a portion, and how much guests are still buying.

A 20% increase in chicken is not a 20% increase in the dish

The example makes four portions. Its ingredient bill was €13.96, including €8.50 for chicken. Raising that line by 20% adds €1.70 to the batch. Everything else stays unchanged, so the new total is €15.66: €3.915 per portion, displayed as €3.92. The recipe cost rises by about 12.18%, not 20%.

At €14 of sales excluding VAT, food cost rises from 24.93% to 27.96%. The amount left after ingredients falls from €10.51 to €10.085 per portion. Keep the unrounded numbers for the calculation; rounding each step would distort the comparison.

Try the same check in MenuAI’s free Food Cost & Menu Pricing Calculator. Use recipe mode to change the purchase price of chicken alone. In quick mode, the percentage change applies to the entire ingredient cost, which answers a different question.

Price the food you use, not just the weight on the plate

A reliable recipe card connects the supplier’s pack to the usable quantity in a batch. Our four-portion recipe uses the following hypothetical prices. Quantities are after preparation and before cooking; purchase costs exclude recoverable input VAT.

Divide by four finished portions to get €3.49. Include the sauce, garnish and cooking oil actually used. If a batch makes fewer portions than planned, dividing by the planned count makes each serving look cheaper than it is.

The carrot line explains preparation yield. To put 200 g of peeled carrot into the recipe at an 80% yield, buy 250 g: 200 ÷ 0.80. At €2/kg, that costs €0.50, not €0.40. The Culinary Institute of America’s yield guidance distinguishes purchased and usable quantities.

Apply the adjustment once. If the recipe already records 250 g of unpeeled carrot, do not divide that purchased quantity by 80% again. Do not apply a preparation yield to cooked weight without matching the stages: rice can gain water while meat loses weight. Convert kilograms to grams and litres to millilitres; converting grams to millilitres needs an appropriate density.

Peels in this calculation are different from a container of unsold curry discarded after service. The first changes usable ingredient cost; the second is a loss to investigate in actual operations.

Use the net price, and name what remains

For a dish, food cost percentage = ingredient cost per portion ÷ selling price excluding VAT × 100. This is theoretical recipe food cost, not a calculation of every restaurant expense.

To remove our illustrative 10% sales VAT, divide €15.40 by 1.10 to obtain €14. Subtracting 10% from €15.40 would give the wrong answer. The European Commission explains that VAT rates vary; 10% here is an assumption, not advice for a country or service.

For purchases, use the cost the business actually bears: exclude deductible input VAT, retain any non-recoverable part. Do not use the sales VAT rate to strip tax from supplier invoices. Check uncertain treatment with the person responsible for your accounts.

Three results can all describe the same dish correctly:

• Ingredients €5, net selling price €15: food cost is 33.33%.
• €10 remains after ingredients: ingredient margin is 10 ÷ 15, or 66.67%.
• Markup uses ingredient cost as its denominator: 10 ÷ 5, or 200%.

That €10 still has to cover staff, rent, utilities, payment fees and other expenses. It is ingredient contribution, not net profit. For takeaway, record packaging separately; a cost base including packaging is broader than food ingredients alone. Compare like with like.

The dish with the lower percentage can contribute less

Consider two other hypothetical dishes, using net selling prices:

Dish B has the higher food cost percentage but contributes more money in this scenario. That does not automatically make it the better menu choice: preparation time, kitchen capacity, demand and sales mix matter too. The useful comparison combines money per portion with portions sold, as illustrated in BCcampus’s menu-engineering chapter.

Two calculated prices, two different decisions

A chosen 30% target gives a net price of ingredient cost ÷ 0.30. For the dearer curry, €3.915 ÷ 0.30 is €13.05 net, or €14.355 including illustrative VAT: €14.36 rounded.

Preserving the previous €10.51 contribution instead gives (€10.51 + €3.915) × 1.10 = €15.8675, or €15.87. One price meets a percentage target; the other preserves money per portion. Neither proves what customers will pay or that the restaurant’s total costs are covered.

The target price is below the current €15.40. That is not a reason to cut the price. Nor is 30% a universal European optimum. Choose a target within a broader operating budget, then recalculate using any final rounded menu price.

A higher price can leave less money over the week

Suppose ingredients cost €4, a dish sells for €14 net, and weekly sales are 100 portions. Ingredient contribution is €1,000. Raise the net price to €15 and assume sales fall to 85: contribution becomes (15 − 4) × 85 = €935.

The fall to 85 is a scenario assumption, not a demand forecast. At least 91 portions would be needed to preserve the old contribution under these assumptions. After a price change, observe portions sold, contribution, comparable service periods and whether guests switch to another dish. A higher contribution on one plate is only part of the decision.

Questions worth settling before you update the recipe

Does food cost include kitchen wages?

Not in this ingredient-only calculation. Keep wages and other operating expenses in the wider profitability assessment rather than quietly adding them to one recipe and not another.

Is monthly food cost just purchases divided by sales?

No. Stock changes matter. The starting calculation is opening stock plus purchases minus closing stock, with appropriate accounting adjustments. BCcampus explains monthly food costs. A recipe calculator does not reconcile inventory or identify the cause of a variance.

How should I cost a house-made sauce?

Cost its batch, measure usable output, and allocate the amount actually used in the dish. Keep discarded leftovers visible separately rather than hiding them in a second preparation-loss adjustment.

Should I copy a competitor’s menu price?

Use it as context for portion size and offer, not as proof that your costs are covered. Their purchase terms, staffing and sales mix may be different.

Does changing currency convert my recipe?

No. A currency selector chooses the unit of calculation, not an exchange rate. Enter all ingredient and menu amounts consistently in the chosen currency.

Recheck one dish before the next menu change

Choose a frequently ordered dish affected by a recent invoice change. Bring the invoice and recipe card to the chef; verify usable yield and actual portion size, then calculate current cost. Compare the food cost percentage with money left per portion and recent sales.

Test one response: supplier terms, preparation, portion consistency or a proposed price. Record the assumptions, and check taste, presentation and customer demand before making it permanent. Start with one completed calculation rather than a blanket menu increase.

Open MenuAI’s free Food Cost & Menu Pricing Calculator to run that comparison. Use quick mode if portion cost is already known, or recipe mode for ingredient quantities, units, yield and portions. Test an ingredient-price change and compare the resulting cost and price references. Keep packaging distinct when comparing ingredient-only figures. The calculation supports your decision; it cannot predict sales or replace the restaurant’s full budget.