How to Cost a Dish: A Practical Guide for Restaurant Operators

Knowing how to cost a dish is one of those “absolutely must-have” skill sets for restaurant owners.

It’s like knowing how to make a schedule, do inventory, or cover a section of tables if a server calls out sick and you’re shorthanded.

It’s just part of the job.

A lot of operators still might not do it, though, either because they underestimated how important it really is, or they felt overwhelmed by the math it takes to get accurate numbers.

This guide will help you tackle both of these issues, so you can understand the power of small, data-driven adjustments, along with straightforward steps on how to achieve them.

In this article, you’ll learn:

1. How to break down the total cost of any dish with accuracy
2. Why food cost percentage is the single most important number in your pricing
3. Real-world strategies to improve margins without cutting quality

What Is Dish Costing and Why It Matters

Costing a dish means calculating exactly how much it costs you to make one serving of a specific menu item, down to the penny.

Not just the protein or the main ingredient, but every slice of tomato, every spoonful of sauce, every garnish on the plate, including expenses like packaging and labor costs.

It’s the foundation of knowing your actual food cost.

Knowing the true cost per serving means you’re not guessing where to set menu prices.

When done correctly, dish costing helps you control food costs, reduce food waste, and price items in a way that supports your restaurant’s financial health without alienating guests.

Every smart pricing move starts here.

Step-by-Step Guide to Costing a Dish

If the idea of costing a dish sounds like spreadsheets and stress, don’t worry, we’re breaking it down into five manageable steps.

1. List Every Ingredient in the Dish

Start by writing out everything that goes into a single serving—no shortcuts.

That means listing not just “salmon” but also the oil it’s seared in, the herbs it’s topped with, and the lemon wedge it’s served with.

Break ingredients down to the smallest practical unit: ounces, grams, slices, or even teaspoons.

And if you’re using prepped items, like a house vinaigrette or house-pickled onion, use prep yields to calculate how much of each raw ingredient ends up in one dish.

This is the foundation of your recipe cost, and accuracy here makes everything else easier.

2. Determine the Cost Per Unit for Each Ingredient

Now assign a cost per unit to each ingredient.

Don’t guess, pull the numbers from your actual invoices or supplier sheets, and be sure they are your most current invoice, not from last quarter. Accuracy matters, especially when food prices fluctuate.

Let’s say you bought a 5 lb box of ground beef for $30.

That breaks down to:

• $30 ÷ 5 lb = $6 per pound
• $6 ÷ 16 oz in a pound = $0.375 per ounce

If you have a 4-oz ground beef patty, the protein portion of your burger costs you $1.50.

Use this approach for every ingredient, working from your invoice price down to the exact unit you’re using in the dish.

Tracking prices and monitoring your invoices regularly will help you spot seasonal changes or supplier increases.

If you’re using a restaurant management system or inventory management system, you may already have this data on hand.

3. Calculating the Total Cost of the Dish

Now that you’ve got your list of ingredients and cost per unit for each one, it’s time to total it up.

Multiply each ingredient’s unit cost by the amount used in one serving, then add everything together.

That final number is your total cost to make one plate. This is the foundation of your recipe cost, and it’s what you’ll plug into the food cost percentage formula later.

This step in the process might feel a bit tedious, but knowing your actual food cost can mean the difference between making money or just barely breaking even.

4. Add Packaging Costs (if applicable)

If your dish is available for delivery or takeout, include the cost of any additional items that are included in the order and will be taken, such as containers, bags, utensils, or stickers.

Packaging can be a silent margin killer if you don’t account for it.

These costs may only add a few cents per order, but at scale, they seriously impact your overall cost and profitability.

5. Include Overhead Expenses (optional, but smart)

If you want a clearer view of your restaurant’s food cost percentage, you can include a portion of your labor costs, utilities, and kitchen supplies in each dish.

This gives you a more complete picture of your operational costs.

There’s no perfect formula here, but you can start by dividing a week’s worth of overhead expenses by your total number of covers, or by breaking it down per daypart or prep shift.

It’s extra math, but it can help you fine-tune pricing and give better results if you’re in a situation where every penny counts.

Understanding Food Cost Percentage

Now that you know the actual food cost of each menu item, you can use that number to calculate one of the most important key performance indicators (KPIs) in your business: food cost percentage.

Your food cost percentage indicates how much of the price you charge for a dish is allocated to the ingredients used to prepare it.

For example, let’s say your dish costs $4.25 to make and you charge $15.

Here’s how that breaks down:

• $4.25 ÷ $15 = 0.283
• 0.283 × 100 = 28.3% food cost percentage

That means 28.3% of your revenue from that dish covers ingredient costs. The remaining 71.7% has to cover everything else: labor, overhead, and ideally, your profit.

To calculate food cost percentage, divide the cost to make the dish by its menu price, then multiply by 100.

The formula will look like this:

Food Cost Percentage = (Cost of Dish ÷ Menu Price) × 100

So what’s a good food cost percentage?

Most operators aim for a range of 28% to 35%, but your sweet spot depends on your concept and pricing flexibility.

Upscale restaurants with higher price points might run a bit higher. Fast casual might push lower to protect volume margins.

The important thing isn’t chasing a magic number; it’s knowing your own numbers and using them to guide smart, confident decisions about menu pricing, portion sizes, and overall food expenses.

Tips to Improve Profit Margins Without Compromising Quality

Now that you know your recipe costs and your actual food cost percentage, you can start making strategic adjustments to give you better margins, without sacrificing what makes eating at your restaurant great.

Rework Portion Sizes

Keep a watchful eye on what’s getting scraped into the trash when tables are bussed.

If you see roughly the same amount of food getting left on the plate, that’s not just food waste; it’s wasted money.

Start by reducing portion sizes slightly—even 10% can make a huge difference in your bottom line, lowering food costs without affecting your guests’ experience.

Once you see that most plates are empty when bussing tables, you’ve nailed it, but be aware if customers start making comments about portions being too small.

It’s a fine line to walk, but making small adjustments will keep everyone happy.

Rethink Expensive Low-Sellers

If a dish uses high-cost ingredients and barely moves, cut it.

Low-volume, low-margin dishes hurt your overall food cost percentage and clutter your menu.

To learn more about how to strategically design and get the most from your menu, read our guide on Restaurant Menu Engineering.

Negotiate with Your Vendors

You’d be surprised how often suppliers are willing to work with you on pricing, especially if you commit to volume or are flexible on brands.

Use your order history and volume to ask for better deals.

Even a small drop in food and beverage supplies pricing can improve your total food cost percentage over time and help you control costs at the source.

Swap Ingredients with Minimal Customer Impact

Switching out a premium imported cheese for a local alternative can shave real dollars off your cost per serving.

Taste every adjustment in the same context your customers will experience it. You don’t want to make a choice that could turn off a large percentage of your guests.

Start with small flavor differences, for example, instead of using expensive peanut oil in the fryers, use a blended oil.

If it doesn’t affect the guest experience, it’s a win.

Use Higher-Margin Add-Ons

Extras like dips, sides, or toppings can carry a low cost per unit and a high markup.

Promote these on in-house menus and your restaurant website to drive up average ticket size without raising base menu prices.

Frequently Asked Questions About Costing a Dish

What is dish costing?

Dish costing is the process of calculating how much it costs to make one serving of a specific menu item, including every ingredient, plus optional costs like packaging or overhead. It’s the foundation for pricing and profitability.

How do I calculate the price of a dish?

Start by adding up the total cost of the ingredients used in a single serving. Then divide that number by your target food cost percentage (as a decimal) to find the right menu price. For example, if a dish costs $4.50 and your target food cost percentage is 30%, the menu price would be $4.50 ÷ 0.30 = $15.

How do I calculate the profit of a dish?

Subtract your actual food cost and other associated costs (like packaging or labor allocation) from the menu price. What’s left is your gross profit per dish.

How do I calculate food cost percentage?

Food cost percentage tells you what portion of a dish’s sales price is spent on the ingredients that go into it. Here’s the formula: (Cost of Dish ÷ Menu Price) × 100 = Food Cost Percentage. Let’s say it costs you $5.20 in ingredients to make a pasta dish, and you sell it for $16:

• $5.20 ÷ $16 = 0.325
• 0.325 × 100 = 32.5% food cost percentage

This means 32.5% of your revenue from that dish goes toward covering the ingredient costs, and the remaining 67.5% goes toward labor, overhead, and profit.

What’s a good food cost percentage to aim for?

Most operators aim for 28% to 35%, but the right number depends on your concept, format, and operating costs. There’s no universal “best” food cost percentage, but staying within range gives you healthier margins.

Should I include labor in dish costing?

Labor isn’t usually included in recipe costing, but some operators do allocate a portion of labor costs to better understand their overall food expenses. It depends on how detailed you want your margins to be.

Better Decisions Come From Knowing The Numbers

When you understand the true cost of every dish on your menu, you stop guessing and start making smarter, more profitable decisions.

Whether it’s pricing, portions, or purchasing, the numbers will always tell you what’s working and what needs to change.

Contact ChowNow to learn how a branded Restaurant Website can help you highlight your most profitable dishes so you can turn every online visit into a direct online sale.