Guide
Menu Costing: How to Price a Dish So It Actually Makes Money
How to work out what a dish really costs you, set a price that holds its margin, and find the items on your menu that quietly lose money.
Why most menus are priced wrong
Most menus are priced by looking at what the shop next door charges and landing somewhere near it. That works only if your costs match theirs exactly, which they never do — different suppliers, different portion sizes, different waste, different rent.
The result is a menu where a few items carry the business and a few quietly drain it, and the owner cannot tell which is which. Worse, the loss-makers are often the popular ones, so every busy night makes the problem bigger.
Step 1 — Cost one dish properly
Take your bestseller and write down every single thing that goes into it, by weight or by unit. Not roughly — actually weigh it once. Most owners are surprised by how far the real portion is from the intended one.
- List every ingredient in the dish, including oil, spices and sauces
- Weigh or measure the actual portion used, once, on a scale
- Convert each supplier price down to a per-gram or per-unit cost
- Multiply by the portion to get the cost of each ingredient in the dish
- Add packaging: box, bag, lid, napkin, cutlery, delivery sleeve
- Add a waste allowance — trim, spoilage and mistakes are real cost
- Total it. That is your true plate cost
The three costs everyone forgets
Cooking oil, packaging and the free extras — the sauce cup, the bread that comes with it, the bottle of water you throw in. Individually they look trivial. Across a thousand covers a month they are one of the biggest gaps between the margin you think you have and the one you actually have.
Step 2 — Turn cost into a price
The standard approach is food cost percentage: divide the plate cost by the selling price. Most food businesses aim for 25 to 35 percent, meaning a dish costing 10 QAR sells somewhere between roughly 29 and 40 QAR.
| Plate cost | Price at 30% food cost |
|---|---|
| 5 QAR | 17 QAR |
| 8 QAR | 27 QAR |
| 12 QAR | 40 QAR |
| 20 QAR | 67 QAR |
Divide plate cost by your target percentage: 12 ÷ 0.30 = 40. Treat the result as a starting point, then sanity-check it against what your customers will actually pay.
Do not apply one percentage to the whole menu. Drinks usually carry a much lower food cost and can subsidise a signature dish you want to keep affordable. The target is the blend across everything you sell, not every line item.
Margin is not markup
If a dish costs 10 and sells at 15, that is a 50% markup but only a 33% margin. Mixing these up is the most common reason owners believe they earn more than they do.
Step 4 — Keep costs current
Costing once and filing it away is barely better than not doing it. Supplier prices move, portions drift as staff change, and a dish that launched at 65 percent margin can be at 45 percent a year later without anyone touching the menu price.
This is the part worth automating. When recipes are attached to products in your POS, every sale prices itself against current ingredient costs, stock deducts automatically, and margin reports stay accurate without a monthly spreadsheet session. Outale does this with a bill of materials per product, ingredient usage reporting, and a profit view that ranks items by margin.
Start with ten items, not the whole menu
Your ten bestsellers usually account for most of your revenue. Costing just those takes an afternoon and almost always uncovers at least one item priced below what it costs to make.
Common questions
What is a good food cost percentage?
How do I calculate the cost of a recipe?
Should I raise prices or reduce portions?
How often should I re-cost my menu?
Terms used in this guide
- Recipe costingRecipe costing means listing the ingredients and quantities behind a menu item so the system knows what each sale really costs. Once a recipe is attached, every sale deducts the right stock and prices itself against real cost rather than a guess.
- COGS (Cost of Goods Sold)COGS is what the things you sold actually cost you to make or buy — ingredients, packaging and the stock itself, but not rent or salaries. Sales minus COGS gives you gross profit, which is the number that tells you whether your prices are working.
- Gross marginGross margin is the share of a sale you keep after paying for the item itself, written as a percentage. Sell a coffee for 15 QAR that costs 4 QAR in beans, milk and cup, and your gross margin is about 73%.
- WastageWastage is stock you paid for but never sold — spoiled produce, burnt or dropped food, breakages, and items past their date. Logging it with a reason is what turns an invisible leak into a number you can act on.
Read next
- Inventory Management for Small Shops and RestaurantsA practical system for tracking stock, counting without closing the shop, and finding where inventory quietly disappears — built for businesses too small for a warehouse team.
- How to Open a Restaurant in Qatar: The Full ProcessEvery step to open a restaurant or cafe in Qatar — company setup, trade licence, municipality approval, health cards, staff visas, and what it realistically costs.
From the blog
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This guide is general information, not legal or financial advice. Government requirements and fees change — confirm current details with the relevant Qatari authority before making decisions.