Menu costing for cafés and restaurants: price every dish like it matters

Most café and restaurant owners know roughly what their best-selling dish costs to make. Far fewer know exactly, and the difference between roughly and exactly can be the difference between a healthy year and a tight one. Menu costing isn’t glamorous, but it’s one of the few tools that lets you improve profit without selling a single extra plate. This guide walks through a practical method you can use with a notepad or a spreadsheet.

Why does menu costing matter so much?

In a food business, a handful of costs decide whether the year works: food and drink, wages, rent and overheads. Rent is fixed by your lease. Wages are shaped by your award, your roster and, since 1 July 2026, Payday Super. Food cost is the one you can adjust dish by dish, every week.

Small changes add up. A dish that’s a dollar under-priced and sells a few hundred times a month quietly costs you thousands over a year. A portion that’s slightly larger than the recipe says does the same. Costing reveals these leaks.

Step 1: Write a recipe card for every dish

A recipe card lists every ingredient in a dish, the quantity used per portion, and the unit cost. Include the small things: the oil in the pan, the garnish, the butter on the toast, the sauce on the side, the takeaway container. They’re easy to forget and they add up.

Ingredient	Quantity per portion	Purchase price	Unit cost	Cost per portion
Sourdough (slice)	2 slices	$8.00 per loaf of 16 slices	$0.50 per slice	$1.00
Avocado	1/2	$2.40 each	$2.40	$1.20
Feta	40 g	$22.00 per kg	$0.022 per g	$0.88
Cherry tomatoes	50 g	$12.00 per kg	$0.012 per g	$0.60
Oil, seasoning, herbs	allowance	—	—	$0.30
Total				$3.98

Illustrative figures only. Use your own supplier prices, and use prices excluding any GST you can claim back as a credit.

Step 2: Adjust for yield

The price you pay per kilo isn’t the price of what ends up on the plate. Trimming, peeling, bones, cooking loss and unavoidable waste all reduce the usable amount. A yield test measures this:

1. Weigh the ingredient as purchased.
2. Prepare it as you would for service (trim, peel, portion, cook).
3. Weigh the usable result.
4. Divide usable weight by purchased weight to get the yield.

If you pay $30 per kilo for a protein that yields 70% after trimming and cooking, the real cost of usable product is about $42.86 per kilo ($30 divided by 0.7). Cost your recipes on that figure, not the invoice price.

Step 3: Work out the food cost percentage

Take your menu price and remove GST. Cafés and restaurants generally charge GST on meals because the ATO treats food consumed on the premises and hot food as taxable, and GST collected belongs to the ATO, not to you.

• Menu price: $22.00 including GST
• Price excluding GST: $22.00 divided by 1.1 = $20.00
• Dish cost: $3.98
• Food cost percentage: $3.98 divided by $20.00 = 19.9%

Illustrative only. Do this for every dish. A spreadsheet makes it quick to update when supplier prices move. Our guide to GST on food explains which items are taxable.

Step 4: Set your own target, not someone else’s

You’ll hear plenty of rules of thumb about what food cost percentage a café or restaurant “should” run. Treat them with caution. The right target depends on your concept, your labour model, your rent and your prices. A high-volume café with a lean team can run a different food cost from a fine-dining restaurant with a large kitchen brigade.

A better approach is to work backwards from your own numbers. Start with your expected sales, subtract wages, rent and overheads, decide the profit you need, and what’s left is your budget for food and drink. Divide that by sales and you have a target that fits your business. Your accountant can help you build this.

Step 5: Look beyond the percentage

Food cost percentage is useful, but it can mislead on its own. Look at each dish through four lenses:

Lens	Question
Food cost %	Is this dish within my target?
Dollar margin	How many dollars does each sale leave after ingredients?
Popularity	How many do we sell each week?
Labour	How long does it take to prepare and plate?

A steak with a higher food cost percentage but a large dollar margin, strong sales and a quick plate-up may be one of your best dishes. A beautiful salad with a low food cost percentage that takes ten minutes to assemble and rarely sells may be your worst.

Sort your menu into four groups: popular and profitable (keep and protect), popular but less profitable (reprice or rework), profitable but unpopular (promote or reposition), and neither (remove). This simple exercise often reveals dishes that are quietly costing you money.

Step 6: Don’t forget labour

Wages are usually the biggest cost in hospitality. The Fair Work Ombudsman lists cafés and restaurants that mainly sell food for consumption on the premises under the Restaurant Industry Award, and your award sets the pay rates, including higher rates for weekends and public holidays. A dish that needs a lot of hands-on prep effectively costs more than its ingredients suggest. When you rework a menu, consider prep time and skill as well as ingredients. Our page on public holiday trading looks at the cost of opening on your most expensive days.

Step 7: Keep it current

Supplier prices move. Recipes drift. Portions creep as new cooks join. Build a routine:

• Update ingredient prices when invoices change noticeably.
• Recost the menu at least twice a year, and whenever you change it.
• Spot-check portions during service.
• Compare your theoretical food cost with your actual food cost from purchases and stocktakes. A big gap usually means waste, over-portioning or theft.

If costs are rising faster than you can reprice, and you’re heading into a quieter season, our page on a café’s quiet months covers the cash side. If you need a buffer while you rework your menu, you can check what your venue could access without a credit check.

An illustrative example

Illustrative only. A neighbourhood restaurant costs its whole menu for the first time in two years. Most dishes are within its target, but two popular mains have crept well above it as supplier prices rose, and a slow-cooked dish that rarely sells takes an hour of prep each morning. The owner raises the two mains slightly, tightens their portions to match the recipe cards, and replaces the slow-cooked dish with a quicker special. Nothing dramatic changes on the menu, but the monthly food cost and prep hours both come down.

Tools that help

A spreadsheet is enough to start. Many point-of-sale and inventory systems can store recipes and update costs automatically as invoices come in. Whatever you use, the discipline matters more than the software: every dish costed, every price reviewed, every portion checked.

Put your margins to work

Good menu costing tells you where your money comes from. The next question is often what to do with it: a new piece of kitchen equipment, a refresh of the dining room or a buffer for the quiet months. If you’re weighing up any of those, tell us about your venue in a short enquiry. It takes about 60 seconds and there’s no credit check when you first enquire. We don’t spray your details around a crowd of lenders; one real person looks at your business and calls you to talk through options that fit. Please fill in the form accurately so we can match you properly the first time. For more on funding options, see restaurant business loans and café business loans.

See what your venue could qualify for →