Many food businesses set their prices by looking at the restaurant down the road, or by adding a figure that feels right. Sometimes that works. Often it does not, and the owner only finds out when the money runs short at the end of the month.
A better way is to start from what the dish actually costs. It takes about five minutes per dish.
Step 1: Cost the plate
List every ingredient in the dish, in the quantity actually used on the plate, and give each one its current price. Include oil, seasoning, garnish, sauces and anything that goes on the side. Include a small allowance for trim and for things lost in cooking.
Here is an example, using illustrative prices only. Replace them with your own:
- Rice: ₦250
- Chicken: ₦900
- Tomato and pepper base: ₦200
- Oil and seasoning: ₦100
- Fried plantain: ₦150
- Garnish and packaging: ₦50
Total cost of one plate: ₦1,650.
Step 2: Choose a target food cost percentage
Food cost percentage is the plate cost as a share of the selling price. Many kitchens aim for somewhere between 28 and 35 percent, depending on the style of the business. A lower target leaves more room for rent, wages and profit. Choose a figure that suits your concept and costs, and be consistent.
Step 3: Divide
Selling price = plate cost divided by target percentage.
With a target of 30 percent: ₦1,650 ÷ 0.30 = ₦5,500. Each plate leaves ₦3,850 after food cost, to cover everything else the business pays for.
Step 4: Check against your market
If ₦5,500 is far more than your guests will pay, do not just lower the price and accept the lost margin. Look at the plate instead. Can the portion be adjusted? Can a costly ingredient be replaced by a cheaper one that keeps the quality? Can the plate be made more attractive so that the higher price feels fair?
Step 5: Review it regularly
Ingredient prices change, so your cost changes. Re-check your key dishes every quarter, and sooner if you notice a big jump in the price of a main ingredient.
A note on what food cost does not include
Food cost covers ingredients only. Wages, rent, power, gas and other running costs come out of what is left. So a plate that looks profitable on food cost alone may still lose money overall if it takes a lot of labour. Good pricing looks at both.
Try it with your own dishes using our menu price calculator. If you would like help costing a whole menu, talk to us about menu engineering.
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