Calculating Plate Cost

If you are changing your menu, or if you just purchased a restaurant, you should do a plate cost of each menu item. 

Plate cost is the total input cost for a menu item.   It really doesn’t matter if you are serving a slice of pie on a plate, or several courses for carryout, you must know what it costs you to present that menu item to your guest.   You then divide that cost amount by your selling price to calculate your plate cost.

After all, if you have a projected food cost for your business, you have to know if each menu item helps you meet your projection. 

Admittedly, it is pretty simple to calculate the cost of serving a slice of pie.  You just start with your cost for the whole pie, and then use the yield to calculate the cost of each slice.  If the cost of the whole pie is $8.80 and it will yield 6 slices, then your plate cost is $1.47.  If your menu cost is $3.95, your plate cost is 37.13%.

Of course, it gets a bit more complicated if your bake your own pies in the restaurant.  In that case you have to have a recipe that your baker follows, so you can add up all the ingredient costs, to determine your cost for the pie.  Then you can calculate your plate cost, using the formula. 

The same applies to your other menu items.  You have to know the ingredient cost, so you must have a recipe for each item on your menu.  If you don’t have a documented recipe then you can’t accurately calculate your plate cost.  Thus the first step in calculating your plate cost for each menu item is to have a recipe, a recipe that is followed for each serving of that menu item. 

Of course, if your have a menu item that has several different ingredients, then you are going to have some work to do, especially if some of those ingredients have their own recipes.  Say that you have a hamburger that is made with your own special dressing.  You must calculate what a batch of your special dressing costs to make and then figure a yield, then determine the input cost of that dressing for each hamburger that you serve. 

Reading this far, your immediate thought might be this sounds like a LOT of work for a very low payoff.  Not really!  First of all, if you have a typical menu you probably have only about 45 to 60 menu items that would need to be costed out.  Second, most menu items have several of the same ingredients, so once you determine the cost of that ingredient portion, you can use that for every recipe. 

The much bigger payoff is that you will know exactly how much it costs you to serve that menu item and thus know if you are charging the correct price for this item on your menu.  And you then can calculate exactly the contribution to profit. 

If you don’t know, then you are just guessing.  Guessing is not the way to run a successful restaurant.

Now that you know the cost of each menu item, you have to make sure that it priced to contribute to your profit.