Connections for Success

 

05.05.16

Menu Costing Affords Restaurateurs Proper Pricing and Inventory Management

How often do you cost your menu items? Menu costing allows for proper pricing and inventory management.

Start by calculating the cost to produce the menu item. Obtain a menu item’s recipe list and determine the cost for each ingredient.

Once you determine the menu item’s cost, you can more effectively determine price.

Menu prices can be based on a combination of the following factors:

  • Food cost percentage – On average, food costs range between 27% – 33%. Full-service restaurants are on the higher end of the range, while fast casual tend to be on the lower end.
  • Desired profit margins – Margins (e.g. $10 margin on a main entrée) can be used for higher cost food items.
  • Competitor’s prices – Prices should be comparable to competitor’s prices.

It is recommended that restaurants calculate the cost of menu items at least twice a year in order to respond to changing food costs.

The benefits of recipe costing include:

  • Improved profitability due to properly priced menu items;
  • Improved control over inventory management; and
  • A better handle on your menu items’ costs and sales mix, which can lead to efficiency in maintaining efficient inventory levels.

If you have any questions regarding recipe costing, please contact Darwin Mintu at 312.670.7444. Visit ORBA.com to learn more about our Restaurant Group.

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