Restaurant owners conduct recipe costing in order to maintain profitability. Understanding how to cost out a recipe allows you to price your menu items accurately in order to manage expenses.
This guide will walk you through the details of restaurant recipe costing, providing you the knowledge to succeed.
What is Recipe Costing?
Recipe costing is the process of calculating the total cost of ingredients required to prepare a specific dish. This includes every component, from the main ingredients to the smallest garnishes.
Accurate recipe costing ensures that you can set appropriate menu prices, maintain consistent profit margins, and avoid unexpected expenses.
Why is Recipe Costing Important?
- Profit Management: Knowing the cost of each recipe helps you set menu prices that cover expenses and generate profit.
- Inventory Control: Accurate costing helps manage inventory by identifying high-cost ingredients that may need to be used more sparingly or substituted.
- Waste Reduction: Understanding ingredient costs can lead to better portion control and less waste.
- Financial Planning: Proper costing aids in budgeting and financial forecasting, allowing for better business planning.
How to Cost Out a Recipe
Follow these six steps to effectively cost out a recipe for your restaurant:
- List All Ingredients: Begin by listing every ingredient required for the recipe. This includes main ingredients, spices, oils, and garnishes.
- Determine Quantities: Note the quantity of each ingredient needed. Use precise measurements to ensure accuracy.
- Calculate Ingredient Costs: Find the cost of each ingredient. This can be done by dividing the purchase cost by the quantity purchased. For example, if a 10-pound bag of flour costs $20, and you use 2 pounds for a recipe, the cost of flour for that recipe is $4.
- Account for Overheads: Include additional costs such as labor, utilities, and kitchen equipment depreciation. These are often calculated as a percentage of the total ingredient cost.
- Sum Up the Costs: Add together the costs of all ingredients and overheads to get the total recipe cost.
- Determine Portion Cost: If the recipe yields multiple servings, divide the total recipe cost by the number of portions to get the cost per serving.
Example of Recipe Costing
Recipe for Spaghetti Bolognese (Serves 4)
- Ingredients:
- Ground beef: 1 pound – $5.00
- Spaghetti: 1 pound – $1.50
- Tomato sauce: 2 cups – $2.00
- Onions: 1 – $0.50
- Garlic: 2 cloves – $0.20
- Olive oil: 2 tablespoons – $0.30
- Spices (salt, pepper, oregano): $0.10
- Total Ingredient Cost: $9.60
Overheads (calculated at 20% of ingredient cost): $1.92
Total Recipe Cost: $11.52
Cost per Serving: $11.52 / 4 = $2.88
By accurately costing out this recipe, you can set a menu price that ensures profitability while considering customer willingness to pay.
Recipe Costing: Final Thoughts
Conducting accurate restaurant recipe costing is an essential skill for any restaurant owner. It provides a clear understanding of how to price menu items, control costs, and maintain healthy profit margins. By following the steps outlined in this guide, you can effectively cost out your recipes and set your restaurant up for financial success.
