The Menu Costing Glossary and FAQ Hub
Plain-English definitions for the terms that show up in recipe costing, menu pricing, and margin control, plus straight answers to the questions operators ask most.
- Actual food cost
- The food cost a kitchen really incurred over a period, calculated from opening inventory plus purchases minus closing inventory. It includes waste, over-portioning, spoilage, and theft, which is why it is normally higher than theoretical food cost.
- As-purchased (AP) cost
- The price paid for an ingredient in the form it arrives from the supplier, before any trimming, peeling, or cooking loss. Costing from AP figures without a yield adjustment understates the true cost of what ends up on the plate.
- Blended food cost
- The weighted average food cost percentage across the whole menu, based on what actually sells rather than a simple average of every item. It is the number most operators manage against month to month.
- Contribution margin
- The menu price of an item minus its plate cost, expressed in dollars. It shows how much each sale contributes toward labor, occupancy, and profit, and it often tells a different story than food cost percentage alone.
- Cost of goods sold (COGS)
- The total cost of the food and beverage consumed to generate sales in a period. For a restaurant it is derived from inventory movement and purchases, and it is the numerator in the actual food cost percentage.
- Edible portion (EP) cost
- The cost of an ingredient after accounting for yield loss from trimming, cooking, or preparation. It is the as-purchased cost divided by the yield percentage, and it is the figure that belongs on a recipe card.
- Food cost percentage
- Plate cost divided by menu price, or for a period, cost of goods sold divided by food sales. It is a diagnostic for comparing items and periods on a common scale, not a target to be minimized at all costs.
- Gross profit
- Sales minus cost of goods sold, before labor and overhead are deducted. On a single item it is the same idea as contribution margin; at the business level it is the pool that has to cover everything else.
- Ideal (theoretical) food cost
- The food cost a kitchen would have incurred if every plate had been made exactly to the recipe card with no waste. It is calculated from plate costs multiplied by the sales mix and serves as the benchmark against which actual cost is compared.
- Ingredient unit cost
- The cost of one base unit of an ingredient, such as one ounce, one gram, or one each, derived from the pack price and pack size. Every recipe line is built from this figure, so an error here propagates through every dish.
- Inventory variance
- The difference between the inventory a system expects to be on hand, based on purchases and recorded sales, and what a physical count finds. Persistent variance on a specific item points to waste, over-portioning, or unrecorded use.
- The practice of analyzing each menu item by its contribution margin and its sales volume, then deciding whether to promote, reprice, rework, or remove it. It depends on current plate costs and real sales mix data to be meaningful.
- The share of total sales that each item represents over a period, usually pulled from the point of sale. It is the weighting that turns individual plate costs into a blended food cost for the whole menu.
- Par level
- The quantity of an ingredient a kitchen aims to keep on hand between deliveries. Par levels affect purchasing and spoilage, and indirectly the gap between actual and theoretical food cost, but they are not part of the recipe card itself.
- Plate cost
- The total food and packaging cost of one serving of a menu item as written on the recipe card, including sub-recipes, garnish, and any allowance for incidentals. It is the foundation of every pricing and margin decision.
- Portion control
- The set of tools and habits (scales, scoops, ladles, portion cups, plating specs) that keep the quantity served consistent with the recipe card. Without it, plate cost is an aspiration rather than a measurement.
- Prime cost
- Cost of goods sold plus total labor cost, taken together. It is the most-watched operating number in many restaurants because it captures the two largest controllable expenses in one figure.
- Q factor
- A small per-plate allowance added to a recipe card to cover low-cost items that are impractical to cost individually, such as salt, oil, and garnish. It keeps recipe cards manageable while acknowledging that these items are not free.
- Recipe card
- The standardized record of a dish: ingredients, quantities, units, yields, method, and the resulting plate cost. It is the unit of truth in a costing system, and it is only useful if it is current and consistently formatted.
- Recipe yield
- The number of portions, or the total weight or volume, that a recipe actually produces when made as written. Measuring real yield rather than trusting the recipe header is one of the most effective ways to improve costing accuracy.
- Shrinkage
- Loss of inventory that does not show up as sales, whether from spoilage, breakage, over-portioning, or theft. It appears as the gap between actual and theoretical food cost and as variance in inventory counts.
- Standardized recipe
- A recipe written with fixed quantities, units, method, and plating so that any cook produces the same result at the same cost. Standardization is what makes a plate cost repeatable rather than a one-time estimate.
- Sub-recipe
- A component such as a stock, sauce, dressing, or spice blend that is costed as its own recipe with its own yield, then used as an ingredient in other recipes. Sub-recipes let one price change flow through every dish that uses the component.
- Target margin
- The contribution margin, in dollars or as a percentage of price, that an operator wants each item or the menu as a whole to achieve. It is set from the business's cost structure and used to derive prices from plate costs.
- Trim loss
- The portion of an as-purchased ingredient removed and discarded during preparation, such as fat, bone, peel, or stem. Trim loss is captured in the yield percentage so that the usable portion carries the full cost of what was bought.
- Unit of measure conversion
- The translation between the unit an ingredient is purchased in (case, pound, gallon) and the unit a recipe uses (ounce, cup, each). Conversion errors are the single most common cause of wrong plate costs.
- Waste factor
- An allowance applied to a recipe or ingredient to reflect expected loss beyond trim, such as spillage or product that does not survive service. Some operators fold it into yield; others apply it separately. Either way it should be explicit.
- Yield percentage
- The usable portion of an ingredient after preparation, expressed as a share of the as-purchased quantity. Dividing the as-purchased cost by the yield percentage produces the edible portion cost used on the recipe card.
Questions people ask
What is the difference between food cost and plate cost?
Plate cost is the cost of one serving of a specific item, built from the recipe card. Food cost usually refers to the percentage that plate cost represents of the menu price, or, for a period, the cost of goods sold as a share of food sales. Plate cost is a dollar figure per item; food cost is a ratio used to compare items and periods.
How do I calculate the plate cost of a recipe?
For each ingredient, find the cost per base unit from the pack price and pack size, adjust for yield to get the edible portion cost, and multiply by the quantity the recipe uses. Add up every line, include any sub-recipes at their own per-unit cost, add an allowance for incidentals if you use one, and divide by the number of portions the batch produces.
Why is my actual food cost higher than my theoretical food cost?
Because theoretical cost assumes every plate was made exactly to the card with no loss. The gap is made up of over-portioning, waste, spoilage, comps that were not recorded, and sometimes theft. A small, stable gap is normal. A growing gap is a signal to check portioning, prep quantities, and inventory handling before touching prices.
Should I price every item to the same food cost percentage?
No. A uniform percentage produces a menu where expensive proteins are overpriced and cheap items are underpriced relative to what guests will pay. It is more useful to set percentage targets as a guide, then look at contribution margin in dollars for each item and manage the blended percentage across the menu as the number that has to hold.
What are sub-recipes and why do they matter?
A sub-recipe is any batch component, such as a stock, sauce, or dressing, that is costed once with its own yield and then used as an ingredient elsewhere. They matter because they eliminate the same component being costed differently in different dishes, and because a single price update flows through every recipe that uses the component.
How often should ingredient prices be updated?
The ingredients that make up most of your spend should be updated whenever an invoice shows a change, which in practice means a weekly pass through the invoices. The full ingredient list is worth reviewing monthly. Yields on the most expensive sub-recipes should be re-measured a few times a year.
What is menu engineering and do I need it?
Menu engineering is the practice of comparing each item's contribution margin against its sales volume and deciding what to promote, reprice, rework, or cut. Any operation with more than a handful of items benefits from it, but it only works with current plate costs and real sales mix data. Done on stale numbers it produces confident decisions built on the wrong facts.
How do I respond when a key ingredient price jumps?
First, run the numbers for every dish that uses the ingredient to see the new plate cost and food cost percentage at the current price. Then choose deliberately between absorbing the increase, adjusting the portion, substituting a comparable component, or raising the price. Small and frequent price moves are usually easier for guests to accept than one large jump.
Is a spreadsheet good enough for recipe costing?
For a short, stable menu with one disciplined owner of the workbook, yes. Spreadsheets tend to break down when sub-recipes multiply, when more than one person needs to edit, and when the sheet has to be reconciled with purchases and sales. The signal to move on is not menu size but how painful a single price update has become.
Does plate cost include labor?
By convention, no. Plate cost covers food and packaging, and labor is tracked separately as part of prime cost. Some operators add a labor allocation for prep-heavy items, which is acceptable if it is applied consistently across every card. Mixing labor into some recipes and not others makes the menu impossible to compare item to item.
What is blended food cost and why does it matter more than item cost?
Blended food cost is the weighted average food cost percentage across everything you actually sell. Individual items can and should vary widely; what has to hold is the average across the real sales mix. It matters more than any single item because it is the number that determines whether the business covers its costs in a given month.
How do I find the menu items that are losing money?
Look at contribution margin per item alongside sales volume, not just food cost percentage. The losers are often mid-menu items whose plate cost crept up over months of supplier increases, or high-volume sides where the portion grew or a sub-recipe was never re-costed. Cross-check anything that looks too good or too bad against actual usage before acting.