Recipe costing is the process of working out what each menu item costs to make, based on its ingredients, quantities and yields. The result is compared with the selling price to show the gross margin on each dish.
Each ingredient has a purchase price and unit, and each recipe lists how much is used, allowing for trim and waste. The system adds up the cost and divides it by the price to show food cost percentage. Linked to the POS, recipes also deduct ingredients as items sell.
Cafes, restaurants and QSRs use costing to set menu prices, evaluate specials and catch margin creep when supplier prices rise. It underpins stock control, ordering and menu engineering. Seasonal produce and supplier changes can move food cost quickly, so some venues review their highest-volume dishes monthly. Even a rough cost for popular items is better than relying on memory or a rule of thumb.
Costs go stale when supplier prices change, so update them regularly. Check that modifiers, sauces and garnishes are included, that yields are realistic and that units match across purchasing and recipes. Remember that cost percentage is only part of the story, since labour and overheads also matter.
Accurate costing helps owners price with confidence and see where profit is made or lost. It is a core part of hospitality inventory systems.