If you set menu prices by copying competitors or guessing, you are leaving profit on the table — or quietly losing money on your best sellers. Recipe costing for restaurants is the discipline of working out exactly what each dish costs to make, so you can price it for a healthy margin. This guide shows you how to do it, step by step, in rupees.
What is recipe costing?
Recipe costing means breaking a dish down into every ingredient it uses, in the exact quantities, and adding up the cost. Once you know a dish’s true cost, you can decide a selling price that hits your target food cost percentage and covers your other expenses with profit left over.
Step 1: Standardise the recipe
You cannot cost a dish that changes every time it is made. Write down a standard recipe: each ingredient, its precise quantity, and the yield (how many portions it produces). This also keeps quality consistent, which matters just as much as cost.
Step 2: Cost each ingredient
Take the price you pay for each ingredient and convert it to the unit your recipe uses. For example, if paneer costs ₹320 per kg and a dish uses 150 g, that portion of paneer costs:
- ₹320 ÷ 1000 g × 150 g = ₹48
Do this for every ingredient in the recipe, including oil, spices and garnishes. Small items add up, so do not skip them.
Step 3: Add up the plate cost
Say a paneer dish works out to:
- Paneer 150 g: ₹48
- Gravy base, onion, tomato, cream: ₹22
- Spices, oil, garnish: ₹10
- Total plate cost: ₹80
That ₹80 is your raw food cost for one portion. It does not yet include labour, gas, rent or packaging — those are covered by your margin.
Step 4: Set the selling price
Now decide what food cost percentage you want the dish to run at. As general guidance many Indian restaurants aim for a food cost in the region of 28–35%, though this varies by format. To find a price for a target percentage, divide the plate cost by the target:
- Price = Plate cost ÷ target food cost %
- ₹80 ÷ 0.30 = ₹267 (before tax)
You would then round to a sensible menu price — say ₹265 or ₹275 — and check it against what your customers will accept. If the market price is far below your target, you need to rework the recipe, portion or ingredient sourcing rather than simply absorbing the loss.
Step 5: Review as prices change
Ingredient prices move constantly, especially vegetables and dairy. A dish that hit 30% food cost last quarter may be at 38% today without you noticing. Recost your key dishes regularly so your menu prices keep pace. This is far easier when your system tracks purchase prices and recipes together — see how recipe-level inventory management keeps live food cost updated as your buying prices change.
Using recipe costing to shape your menu
Once every dish is costed, you can see which items are genuinely profitable and which just look popular. Combine cost data with sales data and you can:
- Promote high-margin dishes that also sell well.
- Rework or reprice low-margin favourites.
- Drop dishes that cost a lot and sell little.
- Design combos that raise the average order value.
Doing this in a spreadsheet is possible but tedious. A restaurant POS with recipe costing built in updates plate costs automatically as prices change and shows margins next to sales, so pricing decisions take minutes instead of hours.
Frequently asked questions
What costs should recipe costing include?
Include every raw ingredient that goes into the dish, in exact quantities — main items plus oil, spices, garnishes and sauces. Labour, rent and utilities are covered by your margin, not the plate cost.
How do I turn plate cost into a menu price?
Divide the plate cost by your target food cost percentage. For example, a ₹80 plate cost at a 30% target gives roughly ₹267 before tax, which you then round and sanity-check against market prices.
How often should I recost my recipes?
Recost key dishes whenever ingredient prices shift noticeably, and at least once a quarter. Vegetables and dairy move often, so frequent review keeps your margins from slipping unnoticed.
Can recipe costing help me decide what to remove from the menu?
Yes. Combining cost with sales data shows which dishes are both profitable and popular, and which cost a lot while selling little — the clearest candidates to rework or drop.
