how do restaurants calculate the prices of each dish? Do they accurately do it or just a rough estimate?
In: Economics
There are several methods, but they all boil down to understanding how much your food costs and having Standardized Recipes.
In order to be successful, your recipes are consistent – this means they taste the same, but also that they cost the same every time you make them and every time the guest orders them.
For the simplest example, we’ll cost out a hotdog on a bun. The Hot Dog itself costs $0.50 and the bun costs $0.25. Your Total Food Cost is $0.75.
If we want to run a 30% food cost (base industry standard), we figure:
$0.75 / 0.30 = $2.50
Our Menu Price is $2.50. Our Gross Profit is $1.75.
That $1.75 goes towards our overhead for producing the Hot Dog (our cook making it, our electricity in heating it up, any paper products or condiments, washing the dishes, etc.)
Our Net Profit is what remains after all of those pennies, nickels and dimes are spent getting the hotdog from the package to our guest’s bellies.
Again, at its most basic level, you don’t rely on selling one item once to make any money- you rely on selling a lot of items quickly. If a cook can produce 60 hot dog meals in an hour, that’s $105 in gross profit per hour.
Food Distributors now have applications that will break down the ingredients cost to the teaspoon, and you enter your recipe into the form. Once you have cost out the recipe, you can see how much each portion costs and then know how much to charge for each menu item.
There are other, more complex methods, that involve padding a profit margin into each plate.
Source: Former Chef, Restaurant Group Manager and Culinary Arts & Cost Controls Instructor at accredited Culinary Arts Academy
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