Do you want to save money, stop wasting food, and stick to your budget while still eating great?
Whether you’re trying to cook healthy meals for your family or are a restaurant owner trying to boost your profits, a recipe cost calculator can help you achieve your goals. Keep reading to learn how to track your food costs down to the portion and what you can do with that information.
Don’t forget to grab our sample recipe cost calculator spreadsheet and make a copy for yourself!
Why Knowing Recipe Costs Helps at Home
What do you know about your grocery budget? How much you spend per month? How much you spend per week or trip to the grocery store? What about per meal?
You can cook a healthy, filling meal for around $2 per person if you focus on keeping costs low and about $4 if you’re a little more relaxed about what you spend. Multiply that by the number of meals (breakfast, lunch, and dinner) and days that you usually shop for. If you’re spending more on each trip, is it because you’re:
- Having food go bad before you cook it?
- Buying ingredients in packages bigger than you need?
- Absorbing cleaning supplies or other purchases into your grocery budget instead of tracking them separately?
- Buying expensive snacks or processed foods?
- Splurging on steak or lobster?
Knowing your cost per recipe or meal lets you know exactly where you can trim your budget, how much to buy when you go shopping, and when you can treat yourself if you want to.
Why Restaurant Owners Must Know Their Recipe Costs
If you’re cooking at home, it’s OK if you go over budget on some meals if that’s how you choose to spend your money. If you’re running a restaurant, not sticking to a budget could mean going out of business.
The average restaurant profit margin is only three to five percent. With up to half of your costs coming from food, maintaining tight control over your food costs is the key to success.
This doesn’t mean always trying to go lower, though. A good $20 dish might sell better than a bad $15 dish. What you don’t want to do is price something at $15 because you feel like that’s a good price without realizing you’re putting in $16 worth of ingredients.
Knowing your per-plate recipe costs helps you understand the minimum amount you must sell a dish to cover your food, overhead, and profit. You then need to think about your customers’ preferences and how you want to position your restaurant in the market to decide if that’s a good price for your menu.
If it isn’t, you’ll need to adjust your recipe or skip that dish altogether.
How to Calculate Your Recipe Costs
Calculating your recipe costs is a simple three-step process. (It may be easier to follow along if you download our free recipe cost calculator now.)
1. Write Out Your Recipe
Write out your full recipe as you actually cook it. If you use a recipe book, don’t just copy it if that’s not exactly how you make it. For anything that isn’t a precise measurement, e.g., a sprinkle of seasoning or one potato, use a measuring cup or scale to get its volume or weight.
2. Figure Out Your Ingredient Costs
Next, to each ingredient on your recipe, write down its cost per unit. For example, if you need two pounds of chicken and chicken is $5.99 per pound, write down $5.99 per pound. Next, to that, multiply $5.99 times two for a total cost of $11.98. This makes it easy to update your recipe cost when food prices change.
Some items only come in packages bigger than you need. In these cases, you need to figure out if it’s something you can use again.
- If it’s something that lasts a long time, like cooking oil, you can get out your calculator to figure out the cost per ounce or tablespoon. Use that number for your ingredient cost.
- If it’s something you end up throwing away, as the other half of a container of broth, use the cost of the entire container as the total cost for that ingredient.
3. Add it Up
Once you have all of your ingredient costs, add them all up for your total recipe cost. Divide by the number of servings to get the per-serving cost.
Remember to use the number of servings you actually use. Don’t use the number from the original recipe if that’s not how much you serve.
Additional Steps for Restaurants
Restaurants need to add three more numbers to their per-serving cost to get their total costs and needed selling price.
Overhead is all of your other expenses. This includes things like rent, wages, and utilities. There are two ways to figure out overhead.
- If most of your items are priced similarly, you can divide your total monthly overhead by the total meals you serve each month. Add that flat amount to each serving’s cost.
- Otherwise, you can use a ratio. Look at your profit-and-loss statements for the last year. If you spend an average of $5 on overhead for every $10 in food costs, your ratio is 0.5. For each serving, multiply your ingredient costs times 0.5 to get your overhead cost.
Waste is typically unavoidable in a restaurant setting. Some things may need to be precooked and thrown away at the end of the night if not ordered. Other things may have random slowdowns in sales and go bad before you can sell them.
To calculate waste, you need to track exactly how much you throw away. If you only serve 90 percent of what you buy, you should add another ten percent of ingredient costs to account for waste.
There are three different ways you can calculate your waste.
- Dividing the value of all the food you threw away by your total food purchasing costs. This is the simplest method.
- Dividing the number of times you sold a specific dish by the number of times you made it. This method is good for restaurants that precook their meals and throw away unsold portions.
- Dividing the number of times you sold a specific dish by the number you could have sold with the amount of ingredients you bought to make that dish. This is the most accurate method but gets complicated when you use the same ingredients for multiple dishes.
If you use the third method, make sure you’re only tracking ingredients that went into that dish or were thrown away. If you bought enough ingredients to make 100 of the dish, used some of the ingredients to make another dish, and only had enough ingredients left to make 80 of the original dish, divide by 80, not by 100.
Now that you have all of your food costs, overhead, and waste, you need to add a profit. To do so, multiply your total costs by your desired profit margin.
This might be the average five percent, or you can go higher if you think your customers will pay for it. If you want, you can vary your margin by dish based on how popular it is or round up to a number that looks good on your menu.
Extra Credit: Prime Costs
After calculating your recipe cost and profit you can take an additional step and calculate your restaurant’s prime cost. Prime cost provides a helpful metric to the overall management of your restaurant. Combine with recipe costs and profitability, the prime cost can illuminate a profitable path forward for your restaurant.
Use Your Recipe Costs for Smart Buying
Once you have your recipe costs, buying food for home or your restaurant becomes a breeze.
- Figure out how much of each recipe you want to make.
- Add all of those ingredients to your shopping list or food order guide with the cost you’re expecting to pay (from your cost calculator).
- Sort your shopping list by the total cost (not unit cost) of each ingredient.
- Start at the top of your list and look for stores or vendors with specials on those items. As you move down your list towards items that make up a smaller portion of your costs, it may not be worth the extra time, gas, or shipping costs to keep looking for a better price.
- If you can’t find a price at or below your expected cost, do another cost calculation with the price that you found. If you’re shopping at home, does the new cost work for your budget, and is it worth it? If you’re shopping for your restaurant, is it time to raise prices or change your menu?
- Buy exactly what you need. Hopefully, you can order in units that match your shopping list. If you can’t, make sure you plan for how to use the extra amount or that you’ve included the cost of waste in your budget.