Price a menu by starting with what each dish actually costs you to make, then dividing that cost by your target food-cost percentage (usually 28-35%). That gives you a floor price grounded in your numbers, not your neighbor’s. From there you adjust with menu engineering and a little price psychology to protect margin on the dishes that carry your business.
Most owners set prices the same three ways: they eyeball what feels reasonable, they check the place down the street, or they mark up whatever the distributor charged that week. All three are guessing. The dishes on your menu don’t cost the same to produce, don’t sell in the same volumes, and don’t earn the same margin, so pricing them by feel is how you end up busy and broke at the same time.
Here’s the approach that actually holds up over a full P&L, built around the one number every plate has to clear.
Start with food-cost percentage pricing
Food-cost percentage is what you spend on ingredients expressed as a share of the menu price. If a plate costs you $4.00 in food and you sell it for $16.00, your food cost is 25%. Full-service restaurants generally aim to keep food cost somewhere in the 28-35% range across the menu; run higher and rent, labor, and everything else starts eating the profit.
To turn that into a price, flip the ratio. Divide the plate cost by your target percentage:
The formula: Menu price = plate cost Ă· target food-cost %. A $4.00 plate at a 30% target prices at $4.00 Ă· 0.30 = $13.33, which you’d round to $13 or $13.50.
The whole thing depends on knowing your true plate cost, and that’s where most people are off. It isn’t just the protein. It’s the oil, the garnish, the two ounces of sauce, the bread you comp with every table, and the portion of spoilage that dish is responsible for. Costing a plate by hand is tedious, which is exactly why it gets skipped. Run your recipes through a recipe and plate cost calculator so you’re pricing off a real number instead of a rough memory of what beef cost last month.
A worked example: pricing a burger
Say you’re pricing a house burger. Here’s the plate broken down:
| Component | Cost |
|---|---|
| 6 oz beef patty | $2.10 |
| Brioche bun | $0.55 |
| Cheese, lettuce, tomato, onion | $0.80 |
| Sauce, pickle, seasoning | $0.35 |
| Fries side | $0.70 |
| Total plate cost | $4.50 |
At a 30% food-cost target, the math says $4.50 Ă· 0.30 = $15.00. That’s your floor. Now the judgment: a burger is a dish people mentally price-check against everywhere they’ve eaten, so demand is sensitive. You might hold it at $15 to stay competitive and instead push margin on the drinks and appetizers ordered alongside it. Meanwhile a dish nobody can comparison-shop, like a seasonal special, can carry a lower food-cost percentage (a higher markup) because the customer has no reference point.
Notice what the formula does and doesn’t do. It gives you a defensible starting price in seconds. It doesn’t tell you that $15.00 is psychologically worse than $14.75, or that this burger might be the single most important item on your menu. That’s the next two layers.
Use menu engineering to protect your winners
Menu engineering sorts every item by two things: how profitable it is (contribution margin, meaning price minus plate cost) and how popular it is (how often it sells). Plot those against each other and every dish lands in one of four buckets:
- Stars — high margin, high sales. Your best dishes. Protect them, feature them, and don’t casually raise the price and scare people off.
- Plowhorses — low margin, high sales. Popular but barely profitable, like that burger. Shave cost, nudge the price, or bundle a high-margin side to fix the math without killing volume.
- Puzzles — high margin, low sales. Great money if only people ordered them. Rename, reposition on the page, or have servers recommend them.
- Dogs — low margin, low sales. They complicate your prep and tie up inventory. Cut most of them.
This is where the food-cost formula alone falls short. Two dishes can both hit a 30% food cost, but if one sells 200 plates a week and the other sells 12, they matter to your bottom line very differently. Pricing without knowing which quadrant a dish sits in means you’re guarding the wrong plates. A quick pass through your sales mix, matched against costed recipes from the plate cost calculator, shows you exactly where each item lands.
Add price psychology last, not first
Once the number is right, the way you present it moves the needle. A few things that reliably work:
- Drop the dollar sign and cents. “16” reads lighter than “$16.00.” Menus that strip currency symbols tend to see guests spend a little more, because the price stops looking like a bill.
- Mind the charm-price tradeoff. $14.95 signals value; $15 signals quality. A white-tablecloth room usually rounds up clean; a casual diner leans on the .95.
- Don’t line prices up in a column. A right-aligned price column trains eyes to scan for the cheapest option. Tuck the price at the end of the description instead.
- Anchor with one premium item. A $42 ribeye makes the $26 dishes feel reasonable, even if almost nobody orders the ribeye.
These are finishing moves. Presentation on top of a price that’s already too low just helps you lose money faster.
Why copying the place down the street is a trap
Matching a competitor’s prices assumes you have their costs, their rent, their supplier deals, their portion sizes, and their labor model. You don’t. Maybe they buy protein at a volume you can’t touch, or they’re quietly running a 40% food cost and bleeding cash you can’t see from the dining room. When you copy the price without the cost structure behind it, you inherit their margin problem and call it a strategy.
Competitor prices are useful as a sanity check, not a source. If your food-cost math prices a dish at $19 and everyone nearby charges $14, that’s a signal to look at your portions and sourcing, not a command to slash your price to $14 and eat the loss. Price from your kitchen out.
Frequently asked questions
What is a good food-cost percentage for a restaurant?
Most full-service restaurants target 28-35% food cost across the menu, though individual dishes will land above or below that. What matters is your blended average, since a low-cost appetizer can offset a pricier entree.
How do I calculate the price of a menu item?
Add up the true cost of every ingredient on the plate, including garnishes, sauces, and sides, then divide that total by your target food-cost percentage. A $5 plate at a 30% target prices at about $16.67, which you’d round to a clean number.
Should I raise prices or shrink portions when costs go up?
Small, regular price adjustments usually beat obvious portion cuts, which regulars notice fast and resent. Reserve portion changes for genuinely oversized plates, and consider swapping a costly garnish before touching the main protein.
How often should I reprice my menu?
Recost your recipes at least quarterly, and any time a key ingredient jumps sharply. You don’t have to reprint constantly, but you should always know your current plate costs so a supplier increase doesn’t quietly erase your margin.
What’s the difference between food cost and contribution margin?
Food cost is a percentage of the price; contribution margin is the actual dollars a dish earns after its ingredients (price minus plate cost). A low food-cost percentage looks great, but a cheap dish with a small dollar margin can still be a weak earner if it doesn’t sell in volume.
Why shouldn’t I just match my competitors’ prices?
Because you don’t share their costs, rent, or supplier deals. Copying their prices without their cost structure means inheriting a margin you can’t see. Use competitor pricing as a reality check, but set your prices from your own plate costs.
Pricing only works if your books are clean. Accurate plate costs, food-cost percentages, and margin all trace back to knowing exactly what you spend and earn. Tabby handles the bookkeeping behind your food business automatically, so the numbers you price from are real. Start a free trial and stop guessing at your margins.
