Seasoned restaurateurs know that keeping strict tabs on food costs is key to promoting a healthy restaurant profit margin. Knowing how to cost out dishes to build menus and calculating ideal food cost percentages are essential factors for success. As a refresher, recipe costing is the process of breaking down each menu item into its individual ingredients and then figuring out those ingredients' costs. When totaled, the ingredient costs comprise the total food cost of a menu item. And when compared to the item's sale price, it offers the best measure of profitability: food cost percentage.

Those percentages display how much it costs for a restaurant to make each menu item—the lower the percentages, the more profitable it becomes. Recipe costing is crucial for gaining insight and visibility into lowering these percentages. Let's discover how to complete recipe costing using a template.

Anatomy of a Recipe Costing Template

Basic recipe costing is fundamentally a matter of listing ingredients and dividing them by their volume or weight.

The essential steps for recipe costing are:

• List every ingredient used in the recipe.
• Write the total cost of each ingredient in its wholesale volume or weight.
• List the amount of each ingredient in the recipe, ensuring precise measurements.
• Implement your price per wholesale item to calculate the price per unit of the ingredient. If a half-ounce of chicken is used, calculate how much one ounce of chicken costs.
• Implement the wholesale price per unit to calculate the cost of each ingredient.

Let's see an example of recipe costing using the template model:

How to Use a Template for Recipe Costing

For this example, let’s make a negroni, a popular drink every bartender knows. First, let’s list out the ingredients:

• Gin
• Sweet vermouth
• Campari

Now, input the total costs of each ingredient in a wholesale format (whatever a single-unit delivery from your supplier costs.)

‍

Ingredient

Bulk ML

Bulk Cost

Bulk Cost Per ML

Recipe Amount

Recipe Unit

Ingredient cost

Gin

1750

$36.99

$0.021

1

ounce

$0.62

Vermouth

1000

$8.99

$0.009

1

ounce

$0.26

Campari

750

$17.99

$0.024

1

ounce

$0.71

Since there are 29.57 milliliters in an ounce, input that number when calculating the ingredient cost. In this example, the total ingredient cost for a negroni is $1.59.

You can then use the ingredient cost to determine a profitable selling price for your menu. Most bars and restaurants want their liquor costs to hit between 15% and 20%. With a $1.59 ingredient cost, this negroni should cost approximately $8.50 to $11.

Planning/Revising Your Menu With a Food Costing Template

Restaurateurs know that consumer preferences constantly change, food prices fluctuate, and trends shift. It's essential to stay knowledgeable and up-to-date on those factors to be successful.

Being mindful of the price point and quality of food that your patrons expect can be useful when assessing potential menu items, as well. Use the data from your food costing template to analyze the items on your menu and their performance. Then, you can use your food costing template to determine whether each dish is a good fit for your menu.

Conversely, you can use the data from the template to see what menu items might not be profitable enough to keep. For example, if you run a fine-dining seafood restaurant, your food costs of high-quality, wild-caught fish will be understandably higher than if you're running a fish taco truck.

Food Costing and Scaling

The first step to building a solid financial foundation for your restaurant is to measure its profitability through food costing. Once you have a firm grasp on that, it might be time to start thinking about expanding your restaurant's services or opening a new location.

As you plan to expand, it's important to note that food costing isn't a one-time thing; it's an ongoing process. When food and beverage costs change, recipe costs also change. As you scale, it's crucial to stay on top of pricing your menu items in a way that ensures you'll make revenue.

Make is a habit to make your food costing calculations to determine when you need to adjust your selling price, reduce portion sizes, or even find similar ingredients at a lower cost. At the end of the day, staying in business in the restaurant industry is all about profit.

Controlling Waste With a Food Costing Template

Implementing a food costing template model in your restaurant will help your staff be more mindful of portion sizes, resulting in less food waste, as well. Since every recipe on your template contains exact measurements, you can train your staff to follow along and create dishes accordingly. If you notice that the same menu items are returning to the kitchen with leftover food on the plate, consider tweaking the measurements and portion sizes and updating your template.

Inventory tracking is also a huge proponent of lessening restaurant waste—inventory should be calculated at the beginning or end of each day. This helps keep the numbers on your template consistent when calculating your food cost percentage.

A Food Costing Template Versus a Food Costing Calculator

If you're ready to start tracking your food costs, a template is a reasonable method to get this done. Doing it manually, even with a template, can be a time-consuming approach, however, and calculations are more prone to error. For more information, check out these 7 reasons why calculating food costs manually will hurt your restaurant.

An alternative time-saving and more accurate method is using a food costing calculator, which does the math to track your food costs accurately, revenue, inventory numbers, percentages, and more. It gives you more data-driven information that you can use to make better-informed choices for your business.

Check out MarketMan's FREE Food Cost Calculator to get started.