Food Costing in Hospitality: Calculate Costs and Maximize Profits
Learn food costing step by step with real examples, interactive calculator and discover how technology can automate this critical process for your business profitability.
60% of restaurants that close do so due to poor cost management. Food costing is your best tool to avoid it.
Article contents
What is food costing and what is it for?
Food costing is a fundamental management tool that allows you to calculate the exact production cost of each dish on your menu. It is, in essence, the economic technical sheet of a recipe.
It goes beyond simply adding ingredients: it considers waste (what's lost when cleaning and preparing), gross and net weights, actual purchase costs and the final yield per portion.
Without food costing, you're setting prices blindly. You could be selling dishes below their actual cost or, worse, losing money on every sale without knowing it.
Food Cost = Total cost of all ingredients in a recipe ÷ Number of portions it produces
Total control
Know the real cost of each dish and make informed decisions about prices and menu.
Why food costing is vital for your business
In hospitality, the difference between a profitable business and one that closes is in the margins. And margins start with good food costing.
60%
of restaurants close in the first 3 years due to poor economic management
25-35%
is the ideal food cost over sale price in hospitality
15-20%
losses from poorly calculated waste is common without food costing
3x
more profitable are businesses that rigorously control their costs
The reality many ignore
A dish that seems profitable could be generating losses if you haven't correctly calculated waste, frying oil, garnishes or ingredients that are wasted. Without food costing, you're navigating blind.
The 6 essential components of food costing
To do food costing correctly, you need to collect and calculate these elements for each ingredient in your recipe.
Ingredient list
All ingredients that make up the dish, including oils, spices, garnishes and decoration elements.
Gross and net weight
Gross weight is what you buy; net is what you actually use after cleaning, peeling and preparing the ingredient.
Waste percentage
The difference between gross and net expressed as a percentage. It varies by product: a fillet has little waste, an artichoke has a lot.
Cost per unit
The actual purchase price per kilogram or unit, updated with current prices from your suppliers.
Resulting portions
How many portions or dishes the complete recipe produces. Essential for calculating unit cost.
Profit margin
The percentage you add to the cost to get the sale price. In hospitality it's usually between 65% and 75%.
How to do food costing step by step
Follow these 6 steps to create professional food costing for any dish on your menu.
List all ingredients
Write down absolutely everything you need to make the dish: main ingredients, garnishes, oils, spices, sauces and decoration. Don't forget anything, every gram counts.
Include prorated frying oil if the dish is fried. It's a hidden cost that many forget.
Calculate the gross weight of each ingredient
Weigh each ingredient as you receive it from the supplier, before any handling. This is your starting point for calculating real costs.
Use a precision scale. Small variations in weight can mean big differences in monthly costs.
Determine the waste for each product
Weigh the ingredient after cleaning, peeling and preparing it. The difference between gross and net is the waste. Express it as a percentage.
Typical waste: potato 15-20%, onion 10%, whole fish 40-50%, bone-in meat 25-35%, lettuce 20%.
Apply the price per kilogram
Use the actual purchase price from your latest invoices. Calculate the cost of the net amount you actually use in the dish.
Update prices monthly. Raw material costs fluctuate and your food costing must reflect it.
Add up all costs
Add the cost of each ingredient to get the total recipe cost. Divide by the number of portions to get the unit cost.
Don't forget to include a small percentage (2-5%) to cover contingencies: spoiled ingredients, mistakes, etc.
Calculate the sale price
Apply your target margin to the cost per portion. If your target food cost is 30%, the sale price will be: cost ÷ 0.30.
Round to a psychologically attractive price (€9.90 instead of €9.73) and adjust the margin if necessary.
Food costing formula
3 practical food costing examples
Let's see how to apply all of the above with three typical dishes from different price ranges.
Spanish Omelette
Budget dish - Tapa
Mushroom Risotto
Mid-range dish - Main
Ribeye with Garnish
Premium dish - Main
Calculate your dish's food cost
Use our free calculator to calculate the cost and suggested sale price of any recipe.
Food Cost Calculator
Calculate your dish cost in real time
Try an example:
Total cost
0.00€
Price excl. VAT
0.00€
RRP (incl. VAT)
0.00€
Tip: VAT is not restaurant income. Calculate your margin on the price without VAT. The ideal food cost is between 25-35% of the sale price excluding tax.
Want to automate this process and have your food costing always up to date?
Request your free demo6 common food costing mistakes (and how to avoid them)
These are the most common mistakes hospitality professionals make when doing food costing. Learn to avoid them.
Forgetting frying oil
The oil used for frying degrades and needs to be changed. It's a real cost that many don't attribute to fried dishes.
Not updating prices
Supplier prices change constantly. Food costing with 6-month-old prices is useless.
Underestimating waste
Using theoretical waste percentages instead of actually measuring them in your kitchen with your products.
Ignoring seasonality
The prices of fruits, vegetables and fish vary enormously depending on the season.
Not including garnishes
Bread, sauces, decoration and 'free' accompaniments have a real cost.
Doing food costing and forgetting it
Food costing stored in a drawer is useless if not used to make decisions.
How technology revolutionizes food costing
The traditional method of food costing with Excel or paper has important limitations. Modern technology solves these problems.
The problem with manual method
Entering data manually takes hours every week
Supplier prices become outdated quickly
Calculating real waste is tedious and rarely done
No alerts when a dish becomes unprofitable
Food&Service: Food Costing with AI
OCR for supplier invoices
Scan your invoices with your phone and prices are automatically updated in all your food costing. The best OCR on the market.
Stock and cost alerts
Receive alerts when stock is low based on thresholds you configure. You'll never run out of critical ingredients.
Recipe production
Create base recipes (sauces, broths, doughs) and use them as ingredients in other dishes. Everything is automatically costed.
Real-time margins
Instantly see which dishes are most profitable and which are below the target margin.
Integrated with POS
The only solution on the market with food costing integrated into the POS. Each sale automatically deducts stock.
See demo in action
Discover how Food&Service automates inventory control, food costing and much more in this 9-minute video.
The only solution with food costing integrated into the POS
Food&Service is the only software that directly connects your food costing with the point of sale. Each dish sold automatically deducts ingredients from inventory and updates your margins in real time.
Frequently asked questions about food costing
What is food costing in hospitality?
Food costing is a technical sheet that details all the ingredients of a dish with their quantities, gross and net weights, waste and costs. It allows you to calculate the exact production cost of each recipe and set profitable sale prices.
How do you calculate the cost of a dish?
Add up the costs of all ingredients (applying the price per kg to the net weight used), add indirect costs like oils and spices, and divide by the number of portions the recipe produces.
What profit margin percentage is recommended in hospitality?
The ideal food cost (raw material cost over sale price) is between 25% and 35%, which equals a margin of 65% to 75%. It varies by establishment type: fine dining may have 30-35% food cost, while fast food usually runs 25-28%.
How often should I update my food costing?
At minimum, once a month. Ideally, update them every time you receive new invoices from suppliers or when there are significant changes in market prices. With software like Food&Service, this is done automatically.
What is waste and how is it calculated?
Waste is the difference between gross weight (what you buy) and net weight (what you actually use) of an ingredient. It's expressed as a percentage: Waste = ((Gross weight - Net weight) / Gross weight) × 100. For example, a 200g potato that ends up at 160g after peeling has 20% waste.
How does food costing affect my restaurant's profitability?
Good food costing allows you to: set prices that guarantee profits, identify unprofitable dishes to eliminate or reformulate them, negotiate better with suppliers by knowing your actual consumption, and reduce waste by controlling portions.
What software should I use for food costing?
There are several options: Excel (basic but manual), specialized food costing software, or integrated solutions like Food&Service that connect food costing with POS, inventory and billing. Integration with POS is key to automating control.
What's the difference between gross weight and net weight?
Gross weight is the weight of the ingredient as you receive it from the supplier (with skin, bones, inedible parts). Net weight is what's actually left after cleaning, peeling and preparing the ingredient for use in the kitchen.
Stop losing money with manual food costing
Food&Service automates cost control with AI, OCR and the only real POS integration on the market. Discover how much you can save.
All this included:
Last update: January 2026
Written by the Food&Service team