How to price a menu: recipe costing explained

Most menus are priced by feel. A chef knows roughly what a dish costs to make. An owner knows roughly what the market will bear. A price lands somewhere between the two, adjusted for what competitors charge and what seems round enough to print. The dish goes on the menu and trading begins.

This approach produces menus that are approximately priced. Whether each dish is profitable, how the mix of dishes across a service performs as a whole, which items are subsidising which, and where the margin is actually coming from, remains unknown until the month-end GP figure arrives and reveals whether the feeling was right.

Recipe costing replaces feeling with calculation. The process is not complicated. The discipline to do it properly and keep it current is where most operations fall short.

What recipe costing is

Recipe costing is the process of calculating the ingredient cost of a dish as it will be produced: the correct quantities, at current supplier prices, accounting for prep yield.

The result is a cost per portion. From that, you calculate a food cost percentage for the dish, which tells you whether the dish is priced in line with your margin targets or working against them.

The formula is straightforward:

Food cost % = (Cost per portion ÷ Selling price) × 100

If a dish costs £4.20 to produce and sells for £14.00, the food cost percentage is 30%. If your target food cost is 30–33%, this dish is within range. If the same dish cost £5.80 to produce, the food cost is 41.4% — the dish is priced too low, or costs too much to make at that price.

The three inputs that have to be right

Recipe costing is only as accurate as the information it is built on. Three inputs determine the quality of the output.

Accurate quantities. The recipe must reflect how the dish is actually produced in your kitchen, not how it was originally designed or how it looked on the development sheet. If the portion has changed since the recipe was written, the costed quantity needs to change too. A recipe that shows 180g of protein for a dish that your kitchen plating guide specifies at 200g will understate costs by 10% on that ingredient every time.

Current prices. Supplier prices change. A recipe costed when beef was £12 per kilogram will show a different food cost percentage when beef is £15 per kilogram, but the recipe card will not update itself. Recipes that have not been repriced against current invoices are producing theoretical food costs that are systematically too low, which means the dishes appear more profitable than they are.

Accurate yields. A chicken breast on the invoice is not the same as a chicken breast on the plate. The trim loss, the cook loss, the portioning margin — each reduces the usable weight. If you buy protein at £10 per kilogram but achieve a 75% yield, the true cost of usable product is £13.33 per kilogram. Using the invoice price without the yield adjustment understates your cost by a third.

Yield is the input most frequently missed in hospitality recipe costing. It is also the input with the most consistent impact on the accuracy of the calculation.

What to do with the cost percentage

Once you have a food cost percentage per dish, the next step is understanding how it sits relative to your menu as a whole and relative to your sales mix.

A dish at 38% food cost is not automatically a problem if it drives high volumes, pairs well with high-margin drinks, or brings customers through the door who spend broadly across the menu. A dish at 22% food cost is not automatically a success if it rarely sells and takes the kitchen forty minutes to produce.

Menu engineering uses two dimensions: margin (the GP contribution per cover) and popularity (how often the dish sells). A dish with high margin and high popularity is what every menu wants more of. A dish with low margin and low popularity is a candidate for removal. The quadrants in between require judgement: a low-margin, high-popularity dish may be worth repricing; a high-margin, low-popularity dish may benefit from better positioning on the menu.

Recipe costing gives you the margin side of this analysis. Your POS gives you the popularity side. Together, they turn menu management from an art into a conversation grounded in data. If you are planning a menu change and need to protect your GP, having this baseline data before you start is essential.

The repricing question

When a dish's food cost percentage is out of range, there are three responses: reprice the dish, reformulate the recipe to reduce cost while maintaining quality, or remove it from the menu.

Repricing is the most common response and the most often avoided. Operators worry about customer reaction, about price anchoring, and about the discomfort of charging more for something that has not visibly changed. These are real concerns. They are also concerns that apply more strongly to bad repricing decisions (changing prices arbitrarily, frequently, in ways that are visible and unexplained) than to deliberate, considered repricing grounded in cost reality.

A dish that has not been repriced in two years whilst ingredient costs have risen 15–20% is not neutral. It is losing margin every service. The repricing conversation is not whether to do it, but how to do it well: which items, by how much, in a way that the menu as a whole remains competitively positioned.

Reformulation is the other lever. If a dish's food cost is high because of a single expensive ingredient that could be replaced or reduced without significantly changing the dish, reformulation may be preferable to repricing. This is a culinary decision as much as a financial one, and it requires the chef's involvement rather than a spreadsheet instruction.

Keeping recipes current

The most common failure in recipe costing is not setting it up — it is keeping it accurate after setup.

Prices change quarterly or more frequently for some ingredients. Portions drift as kitchen teams change. Seasonal substitutions alter the ingredient mix without updating the cost card. A recipe database that is not maintained becomes increasingly unreliable as a decision-making tool, and operators stop trusting it as a result.

The practical solution is to build recipe maintenance into regular operations rather than treating it as a project. When a supplier invoice shows a price increase above a threshold, flag the affected recipes for review. When a new menu launches, cost every new dish before it goes live. When a portion change is made, update the recipe card at the same time.

None of these steps is time-consuming individually. The discipline is making them routine.

Starting without a full recipe database

For operations that want to move towards recipe costing but do not have a complete database, the practical starting point is the dishes that matter most financially.

The top ten dishes by volume, and the top ten by ingredient cost, account for the majority of both revenue and food spend. Costing those twenty dishes (with overlap likely) gives you the most useful picture for the least effort.

From there, add the most recent additions to the menu, then work backwards through the rest of the menu as time allows. A partial recipe database that covers your highest-volume and highest-cost dishes is meaningfully better than no database at all. Understanding how to calculate gross profit margin at the dish level is the natural next step once your recipe costs are in order.

Hops supports recipe costing at the Insight plan tier, connected to real supplier pricing from your invoices and real yield data from your stock takes. If you are not yet at the point where you need recipe costing, the Margin tier gives you category-level GP visibility as a foundation — because knowing your margin is the goal, not having perfect data architecture.