To set a selling price from food cost: divide portion recipe cost by target food cost as a decimal. Example: cost €4 and target 28% → 4 ÷ 0.28 ≈ €14.29. Then check actual % with cost ÷ final price. The formula gives a base; it does not replace competition, rounding, or menu engineering.
The cost sheet and the price "by ear"
Tuesday night after service. The kitchen still smelled of pan and lemon. Counter clean, Excel open beside the printed menu. The owner – call him Makis – had portion cost written clearly: €4.00. Ingredients measured. Purchase prices updated. He had costing. He lacked the bridge from cost to price.
The menu said €12 beside the same dish.
"Why twelve?"
"Sounds fair. The neighbour sells for eleven. If I go higher, guests will scare off."
No formula – instinct, neighbour, and the sense that "a bit over cost" is enough. The dish sold. At month-end the till did not leave what he expected. Food cost % (ingredient cost as a share of selling price – the core menu food cost figure) ran above the target he thought he held. The room filled; the till did not as it should. Common stuck point: portion cost on paper, then pick a price "by ear" because it sounds fair or because the neighbourhood sells that way.
This is part six of the Food Cost series – it continues from What is food cost. If you already have portion recipe cost and stick on "what price do I put", sit with Makis. Clean formula, euro example, when the formula is enough – and when not. No fake industry averages. No promise of automatic profit.
We sat down and did the division
Don't hunt a "fair" price in your head. Take portion cost and divide by target food cost % as a decimal. The target is not a magic Instagram number – it is the % you already track or chose for your concept.
Selling price (excluding VAT / net) = portion cost ÷ target food cost %
If the target is 28%, divide by 0.28. If 30%, by 0.30. The same approach appears in menu costing guides: Menu Price = Total Recipe Cost ÷ Desired Food Cost %.1
Work the example on net price without VAT so you see what ingredient cost eats from the price. For the printed menu price with VAT, ask your accountant. The costing formula is not VAT legal advice.
Makis's dish: cost €4.00, target 28%.
4.00 ÷ 0.28 ≈ €14.29
He looked at €14.29, then at the menu's €12. The gap was about €2.29 net per portion before rent and wages. Don't say print €14.29 tomorrow – say you now have a base, not instinct.
In practice you round. Don't put €14.29 on the menu. Say €14.50 or €14.90 – whatever fits house style and price psychology. Then reverse-check, because that catches the mistake before you print and before month-end.
Food cost % = cost ÷ final price
At €14.50: 4.00 ÷ 14.50 ≈ 0.276 → about 27.6%. Near the 28% target.
At €14.00: 4.00 ÷ 14.00 ≈ 0.286 → about 28.6%. A bit over target.
At the old €12: 4.00 ÷ 12.00 ≈ 0.333 → about 33.3%. That was the till problem he could not name. The reverse check measures actual % – always after rounding, not before.
The % and the euros on the same dish
Makis asked if watching only food cost % is enough. No. The % says how much of the price ingredient cost swallows. It does not say how many euros remain per dish for the rest of the business. Month-end till speaks in euros, not only percentages.
Gross margin (€) = selling price − recipe cost
At €14.50 with €4.00 cost: 14.50 − 4.00 = €10.50.
Those €10.50 are not net profit. They are gross margin (the contribution margin: the euros left after recipe cost): what remains after recipe cost, and from there you pay rent, power, wages and other operating costs. There is no simple "subtract X from every dish" for all of those, because fixed costs follow the month, not one dish. In practice convert them to cost per guest (month fixed ÷ number of guests) and see whether the sum of gross margins covers fixed costs before you talk net. Food cost tells you if the dish fills the till; the P&L tells you if the restaurant works.
At the old €12, gross margin was €8. A good % on paper does not save you if euros per portion are thin and the dish does not sell enough to cover the house. Conversely, a slightly worse % can bring more euros if it sells higher and more often. Watch % and euros together. For which dishes carry the menu and which drag it down, read menu engineering; sales and margin together, not only the price formula on one dish alone.
The mistake of "triple the cost"
Same table, second confusion. "I usually put triple the cost," Makis said. Markup (price as cost times a factor). Sounds simple. It is not the same as target food cost %.
Price with markup = cost × (1 + markup %)
Example: cost €4.00 and markup 250%. 4.00 × (1 + 2.50) = 4.00 × 3.50 = €14.00. Close to the earlier result. Not the same formula. With target food cost % you divide by the target. With markup you multiply by a factor. If you think "I put triple, so I'm at 33%," sometimes you land close. Sometimes not – especially when you round or change only some dishes and leave others on old instinct.
Don't hunt tables of "average market markup". You need clean portion cost and a clean target %. Then choose divide (food cost %) or multiply (markup). Prefer divide by target food cost %, because that % is already what you track on food cost. If you use markup, at least reverse-check after rounding: cost ÷ final price.
When we don't change the printed price yet
The formula gave €14.29. Makis did not go straight to the printer. Right. The formula gives a base. It does not close the menu alone. If you stop at the calculation and ignore the room, you can "fix" % on paper and lose guests in practice.
If the same dish category sells for eleven nearby, €14.50 may not work – even if the maths is right. Then you don't break the formula. You revisit the recipe, the portion, or the dish's place on the menu. Price psychology matters: €9.90 and €10.00 are not the same in a guest's head. €14.50 and €14.90 neither. Round with intent, then reverse-check before you print.
Then Stars and Plowhorses. Some dishes sell a lot and bring good margin. Some sell a lot and bring little. Some cost a lot and barely move. The price formula does not say that – read menu engineering. Don't raise price before you re-cost the recipe. If oil rose, meat changed supplier, or the portion grew in the kitchen, and you only "lift the menu a bit by eye", food cost % can worsen. First cost. Then price. Then check %. For the common causes, read why food cost percentage goes up.
What we got wrong – and how we fixed it
Two mistakes I've made and see often. First: raise price without updating recipe cost. Oil changed. Supplier changed. Portion grew "a little" to look generous. Menu changed or stayed the same "by eye". Spreadsheet lagged. Food cost % left the target until month-end.
Second: use markup and think we hit the food cost % target. "Triple cost, I'm at 33%" – no reverse check after rounding. The fix is boring and right. Keep portion cost updated. Choose target %. Calculate price by division. Round. Check % again. Then decide if the price holds in the room – not before the calculation.
On CostoMenu, on the same path
On CostoMenu the flow is what we just did at the kitchen table. Enter recipe ingredients with purchase prices. See cost per portion. Set a margin / food cost % target. Get a suggested selling price. It does not promise the restaurant becomes automatically profitable. Not a till, not accounting, not POS. It is the bridge from "I know the dish cost" to "I have a base for the price". You decide rounding. You decide if the price holds in your area and for that dish's role on the menu.
To try: open a BEGINNER account via register, enter one recipe with real ingredient prices, see portion cost, set a target food cost %, look at the suggested price. Round and check actual % with cost ÷ final price. Ten minutes for the first dish. Then the rest the same way – not by ear, not because it "sounds fair".
FAQ
Does selling price = cost ÷ food cost % hold?
Yes as a base for menu pricing from food cost. Divide portion recipe cost by target food cost % as a decimal. Then round and check actual % with cost ÷ final price. The formula is a starting point. It does not replace local competition or menu engineering.
Do I put VAT in the formula?
Not in this article's basic example. Work first on the net price without VAT. That way you see food cost % clearly on ingredients. For the printed menu price with VAT, ask your accountant. The costing formula is not VAT advice.
What target % should I use?
No magic number for every restaurant. Target food cost % depends on concept, menu mix, and the rest of your costs. This page does not invent a new ideal %. For how to choose a sensible target, read good food cost percentage.
Markup vs food-cost pricing – what's the difference?
Markup multiplies cost by a factor: cost × (1 + markup %). Food-cost pricing divides by the target %: cost ÷ target food cost. Not the same tool, even when they land near each other. If you use markup, always reverse-check with cost ÷ final price after rounding.
1 As taught in menu costing guides (e.g. Menu Price = Total Recipe Cost ÷ Desired Food Cost % in tools like MenuCostCalculator); same logic in menu costing training material.
If you want the wider frame (recipes, percentages, stock checks, prices), see the guide restaurant cost management.