How the menu price formula works
Every menu price comes from the same arithmetic: what the plate costs you, divided by the share of the price you're prepared to spend on food.
If a dish costs $4.50 to plate and you're targeting 30% food cost, the price is $4.50 ÷ 0.30 = $15.00. The other $10.50 is your gross profit, and it has to cover wages, rent, power, and everything else before any of it is yours.
The calculator above does the same thing, plus three things owners usually skip: a waste allowance on the plate cost, tax on top of the menu price, and a separate price for delivery apps.
A worked example
Take a classic beef burger with fries:
| Item | Cost |
|---|---|
| Beef patty, 180 g | $2.40 |
| Brioche bun | $0.85 |
| Cheese, lettuce, tomato, pickles, sauce | $0.95 |
| Fries, 150 g | $0.55 |
| Waste allowance at 5% | $0.24 |
| Plate cost | $4.99 |
At 30% food cost that's $16.63 before tax. In New Zealand, adding 15% GST gives $19.12, which rounds to a menu price of $19.00 or $19.50. At $19.50 the real food cost works out to 29.4% and you keep $11.97 per burger before overheads.
Now put it on a delivery app at 30% commission with $0.60 of packaging. Because the commission is taken on the GST-inclusive price, the app price needs to be about $31 to keep the same $11.97. List it at the dine-in $19.50 instead and you keep about $5.50, less than half of what the same burger earns in the dining room.
What food cost percentage should you target?
For a full-service restaurant, the overall target is usually 28–35% of food sales. That's an average across the menu, not a rule for every dish. Some items carry the margin and others bring people in:
| Item type | Typical food cost |
|---|---|
| Pasta, pizza, rice and noodle dishes | 20–25% |
| Desserts | 20–28% |
| Burgers, chicken, most mains | 28–33% |
| Steak and seafood | 35–40% |
| Espresso coffee | 12–20% |
If you want the full breakdown of where your overall numbers should sit, the restaurant profit calculator benchmarks food, labour and prime cost from a week of figures.
Why the percentage isn't the whole story
Food cost percentage is the right starting point, but the bank only takes dollars. A $42 steak at 38% food cost leaves $26 in gross profit. A $22 pasta at 22% leaves $17. The steak looks worse on paper and earns more per plate.
So use the target to set a first price, then check the profit per plate column. If a high-percentage dish still earns more dollars than your average main, it's pulling its weight. If a low-percentage dish only earns a few dollars, it's probably underpriced, however good the percentage looks.
Mistakes that make menu prices wrong
- Costing the recipe, not the plate. Garnish, sauces, the butter on the bread and the oil in the fryer all count. That's what the waste allowance is for.
- Calculating food cost on the tax-inclusive price. GST and VAT aren't your money. A dish at $23 including 15% GST is really a $20 sale.
- Using last year's supplier prices. Re-cost your top ten sellers every quarter, or whenever a key ingredient moves more than 10%.
- One price for every channel. Delivery commission comes off the top, so the same price earns far less.
- Pricing off the place down the road. Their rent, wages and portions aren't yours. Check competitors once you know your own number, not before.
For the full approach to pricing a menu, including anchoring, menu layout and when to raise prices, read how to price menu items. If the calculator shows your food cost is running high, this guide to reducing food cost covers the practical fixes.
Frequently asked questions
What is the formula for menu pricing?
Menu price = plate cost ÷ target food cost %. A dish costing $4.50 at a 30% target sells for $15.00 before tax.
What's the difference between food cost % and markup?
They're the same relationship seen from opposite ends. A 30% food cost is a 3.33× markup on cost; 25% is 4×. Markup is easier to say in the kitchen, but food cost % is what shows up on your P&L.
Should I include GST or sales tax?
Calculate on the price excluding tax, then add the tax on top if your menu has to show tax-inclusive prices, as in New Zealand and Australia.
How much more should I charge on delivery apps?
To keep the same dollar profit after a 30% commission and packaging, delivery prices usually need to be 40–60% higher than dine-in. Most operators settle lower and accept a smaller margin. Use the delivery section above to see what that costs you.
How often should I re-cost the menu?
Re-cost your best sellers at least quarterly, and immediately when a major ingredient changes price. A $2/kg rise on beef mince can take a point or more off your margin on every burger you sell.