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How to cost a dish

Costing a dish means working out the real cost of its raw ingredients, wastage included. You add up what each ingredient costs in the quantity that reaches the plate β€” not the quantity you buy β€” and divide by the selling price excluding VAT. A healthy food cost in hospitality runs between 25 % and 35 %.

Published on Β· reviewed on

What a dish costing actually is

It is the cost sheet for a dish: what it costs you to put it on the table counting raw ingredients only. It does not include staff, rent or electricity. Those belong to the gross margin of the business, not to the dish.

It is good for two concrete things: pricing with a reason instead of by eye, and spotting which dishes on your menu are losing money without anyone noticing, because they sell well.

The step almost everyone skips: wastage

You buy a kilo of potatoes, but a kilo does not reach the plate: what reaches it is whatever is left after peeling. If you pay €1.20 a kilo and peeling loses 20 %, the kilo you actually use costs you €1.50.

The formula is direct: real cost per kilo = purchase price Γ· (1 βˆ’ wastage). Without that adjustment every costing comes out low and every margin looks better than it is.

  • Vegetables to peel: 15 % to 30 % wastage is normal.
  • Whole fish to fillet: can exceed 50 %.
  • Meat on the bone: 20 % to 40 % depending on the cut.
  • Packaged product ready to use: no wastage at all.

The sum, with a real dish

Let us take a normal menu dish, with its wastage and its selling price. The selling price is always taken excluding VAT: the VAT is not yours, you collect it for the tax authority.

Grilled octopus Β· full portion
Cooked octopus    200 g Β· €24.00/kg Β· wastage 10 % β†’ €5.33
Potato            150 g Β·  €1.20/kg Β· wastage 20 % β†’ €0.23
Oil and paprika     β€”   Β·      β€”    Β·     β€”        β†’ €0.35
Salt, garnish       β€”   Β·      β€”    Β·     β€”        β†’ €0.15
───────────────────────────────────────────────────────────
Raw ingredient cost                                β†’ €6.06
Selling price €18.00 inc VAT β†’ €16.36 ex VAT
Food cost: 6.06 Γ· 16.36 = 37 %
Gross margin on the dish: €10.30

What food cost is healthy and what is a warning sign

Food cost β€” raw ingredients divided by selling price excluding VAT β€” usually sits between 25 % and 35 % in Spanish hospitality. Below 25 % is unusual and worth checking you have not left ingredients out. Above 40 %, the dish only pays if its volume drags other sales along with it.

The octopus in the example, at 37 %, is high. And it may still be the dish you want on the menu: it leaves €10.30 of gross margin per portion, more than plenty of dishes with a better ratio and a low price. That is why food cost is never read alone: you read it next to the margin in euros and how many portions you sell.

The four mistakes that keep coming back

All of them make the dish look more profitable than it is, which is the dangerous direction for an error to run in.

  • Working from the price including VAT. Inflates the apparent margin by 10 % to 21 %.
  • Forgetting wastage. The most common one and the most distorting.
  • Not counting the oil, the salt, the bread or the garnish. They add up more than you think once multiplied by volume.
  • Doing it once and never again. The price of fish or oil moves several times a year; a costing from two years ago tells you nothing.

How often to redo it

The sensible rhythm is reviewing the costings of your best sellers every three months, and redoing them completely when you change supplier or reprice the menu.

A useful shortcut: you do not need to cost all fifty dishes. Your top ten sellers are usually 60 % or 70 % of your kitchen turnover. Those are the ones that have to be right.

Frequently asked questions

Does dish costing include staff cost?

No. Costing covers raw ingredients only. Staff, rent and utilities are worked out at the level of the business, not the dish: spreading them per dish leads to wrong decisions because the split is always arbitrary.

Do I work the ratio out on the price with or without VAT?

Without. You collect VAT for the tax authority, it is not your income. Working it out on the VAT-inclusive price inflates the apparent margin and is the most frequent mistake of the lot.

Is there an ideal food cost percentage?

Between 25 % and 35 % is normal in Spanish hospitality, but it depends on the type of venue: a grill house working with prime produce runs higher ratios than a cafe. What matters is knowing yours and watching when it moves.

Does Ordeli work out costings for me?

The calculation is yours: Ordeli does not track ingredients, wastage or raw material consumption. What you can do is store the cost per portion on the dish, and it will show you the margin it leaves. That is where this sum ends.

How often should I redo my costings?

The ten dishes you sell most, every three months. The rest, when you change supplier or reprice the menu. A costing from two years ago tells you nothing useful.

How do I set a price from the costing?

Divide the cost by the food cost percentage you want: if the dish costs you €6 and you are aiming for 30 %, the ex-VAT price is €20. But do look afterwards at what margin in euros that leaves and whether the price fits your menu.