How to Price a Menu: Food Cost Formula, Strategy & Menu Engineering

To price a menu, cost every dish from the usable (edible-portion) cost of its ingredients, divide that plate cost by your target food cost percentage, typically around 28-35%, and then adjust the result for competitors, perceived value, and how the dish actually sells. Recheck plate costs whenever supplier prices move, and run a menu engineering review at least once a quarter to decide which items to reprice, promote, rework, or drop.

Below is that process step by step, with worked examples in dollars.

Step 1: Cost Every Dish From Its Usable (EP) Cost

Most pricing mistakes start with plate cost. The common error is costing a recipe from the invoice price per pound, the as-purchased (AP) cost, when part of what you bought never reaches the plate. Salmon loses its skin and pin bones, asparagus loses its woody ends, a case of romaine loses its outer leaves. What you actually serve is the edible-portion (EP) cost: the price per usable pound after trimming and cooking loss.

The conversion is simple: EP cost per lb = AP price per lb ÷ yield %. If you pay $4.00 a pound and keep 80% after trimming, every usable pound costs you $5.00. The food yield calculator does this conversion for you and shows the true cost per usable pound from a quick trim test.

Worked Example: Costing a Salmon Plate

These numbers are illustrative, not benchmarks. A grilled salmon entrée with roasted potatoes, asparagus, and lemon butter costs out like this:

• •Salmon fillet: $11.50/lb AP, 80% yield after skinning and trimming = $14.38/lb EP. A 6 oz portion (0.375 lb) costs $5.39
• •Potatoes: $0.90/lb AP, 85% yield after peeling = $1.06/lb EP. A 6 oz portion costs $0.40
• •Asparagus: $3.50/lb AP, 55% yield after snapping the woody ends = $6.36/lb EP. A 4 oz portion costs $1.59
• •Lemon butter sauce, 1.5 oz: $0.35
• •Oil, seasoning, and garnish allowance: $0.25
• •Total plate cost: $7.98

At a 30% target food cost, the calculated price is $7.98 ÷ 0.30 = $26.60. Rounded to $27, the dish runs at a 29.6% food cost and earns a contribution margin of $19.02 per plate before labor and overhead.

Step 2: Apply a Menu Pricing Formula

Several formulas turn plate cost into a starting price. Most operators use the food cost method first and check the result with one of the others.

Typical food cost targets vary by concept. As rough industry ranges, many quick-service and fast-casual operators run around 25-32%, full-service casual restaurants around 28-35%, and fine dining or steak-heavy menus somewhat higher. Pizza, pasta, and coffee drinks usually run lower. Treat these as starting points, not rules: what matters is that food plus labor, your prime cost, stays within what your sales can support, commonly somewhere around 55-65% of sales.

Food Cost % vs. Contribution Margin

The item with the lowest food cost percentage is not always the most profitable. A pasta that costs $3.60 and sells for $18 runs at 20% food cost and earns $14.40 per plate. A steak that costs $13.30 and sells for $38 runs at 35% but earns $24.70 per plate. You pay rent and wages in dollars, not percentages, so use the percentage to set a price and the dollar contribution margin to judge which items deserve the best spots on the menu.

How to Price Drinks: Pour Cost

Bars price drinks the same way, using pour cost: the cost of the liquor, beer, or wine in a drink divided by its price. Worked example with illustrative prices: a 750 ml bottle of bourbon holds about 25.4 fl oz and costs $27, so each ounce costs about $1.06. An old fashioned with a 2 oz pour and $0.60 of bitters, sugar, and garnish costs $2.73. At a 20% pour cost target that points to about $13.65, so a $14 menu price lands at 19.5%. Many bars target roughly 18-24% overall, with spirits usually lowest and wine by the glass highest. The pour cost calculator gives cost per pour and a suggested price for any bottle size.

Step 3: Check the Price Against the Market

A cost-based price tells you the minimum you can charge. The market tells you what you can charge. Look at competitors to position your prices, but never to replace your own costing, because their rent, labor, portions, and suppliers are not yours.

Step 4: Use Menu Engineering to Decide What to Change

Menu engineering compares every item within a category on two measures: popularity (its share of items sold) and contribution margin (price minus plate cost). A common approach is to call an item popular if its share is at least 70% of an equal share, and profitable if its margin is above the category's weighted average. Each item then lands in one of four groups.

Worked Example: Five Mains in One Month

Illustrative numbers again. A restaurant sells 1,000 mains a month across five items. An equal share would be 20%, so the popularity line is 70% of that, or 14%. The weighted average contribution margin works out to $14.89.

• •Salmon plate: 180 sold (18%), $19.02 margin. Star
• •Roast chicken: 290 sold (29%), $15.20 margin. Star
• •Burger: 320 sold (32%), $11.50 margin. Plowhorse
• •Braised short rib: 90 sold (9%), $21.00 margin. Puzzle
• •Vegetable risotto: 120 sold (12%), $12.40 margin. Dog

The burger is the most-ordered main but earns the least, so a $1 increase or a cheaper side matters most there. The short rib earns the most per plate but is overlooked, so it needs a better menu position and a server push. The risotto, the only vegetarian main, needs a better recipe rather than removal.

Run this with actual sales from your POS and current plate costs. For a fuller view of which dishes and dayparts make money, see our guide on how to track restaurant profitability.

Step 5: Present Prices So Guests Focus on the Food

How prices appear on the menu affects what guests order. These are common menu design practices; test them rather than expecting a fixed result.

• •Drop the dollar signs and trailing zeros: "18" reads more softly than "$18.00"
• •Place the price at the end of the description, not in a right-aligned column that invites guests to scan for the cheapest item
• •Skip the dotted leader lines that connect dish names to prices
• •Match the price style to the concept: prices ending in .95 or .99 suit quick-service and casual menus, while whole numbers suit full-service and fine dining
• •Use an anchor: a premium item near the top of a section makes the dishes around it look reasonable
• •Put your stars and puzzles where the eye goes first, usually the top of each section, or inside a box

How and When to Raise Menu Prices

Costs rise every year, so prices have to move too. Small, regular increases are easier for guests to accept than one large jump after years of flat prices.

Example: the burger above goes from $16 to $17, a 6.25% increase, and monthly sales slip from 320 to 310. Its margin rises from $11.50 to $12.50, so the item now contributes $3,875 a month instead of $3,680. Volume fell, yet profit went up. The break-even point is 320 × $11.50 ÷ $12.50, or about 295 burgers: if sales had dropped below that, the increase would have cost money and should be reversed or made smaller.

Menu Cost Control: Keep Your Prices Accurate After Launch

A perfectly costed menu only stays profitable if the kitchen serves what the recipe card says. The gap between theoretical food cost (what your sales should have cost, based on recipes) and actual food cost (opening inventory plus purchases minus closing inventory) shows how much is leaking through over-portioning, waste, poor yields, and theft. A gap of a point or two is normal; a larger one means your prices are based on numbers the kitchen is not hitting.

This is the tedious part, and it is where MiseKit helps: recipe cards with costs based on your incoming goods prices and measured yields, so plate costs update when a supplier price changes, plus waste and write-off tracking that shows where the gap between theoretical and actual food cost comes from. For more ways to close that gap, see our guide on how to control food costs in cafes.