As you can see, it’s an extension of the Standard Recipe, providing costing details.
Once you have your food costs, you can figure out the selling price of your dishes. The basic formula is:
Selling Price = (Food Cost + Labour Cost + Overhead Cost) + Profit
Your selling price should include all costs plus the profit you would like to earn.
What Should the Food Cost Percentage of Your Selling Price Be?
To compute the selling price, we need the food cost to only be a certain percentage of the selling price.
The amount varies from one restaurant section to another, and is influenced by other costs, such as labour, overhead, and target profit. It generally falls within the profit of 30 to 45%.
Food Costing in Practice
Here is an example to show how to find the selling price of a dish:
- A restaurant has a target food cost percentage of 33%.
- Their newest recipe was calculated to have a food cost of $25 per portion.
- Applying the 33% rule, the target selling price = $25 divided by 0.33 = $75.75
Given this number, the restaurant can decide on the final selling price considering other factors such as competition, volume and labour costs.