Menu Pricing and Food Cost for Restaurants

Menu prices have to do three jobs at once: cover what goes on the plate, contribute to rent, wages and other overheads, and leave a profit, all while feeling fair to guests. The standard method is to cost each dish precisely, divide by a target food cost percentage to get a starting price, and then adjust for competition, perceived value and sales channel. Here’s how to do it step by step, with worked examples.

Step 1: Cost every plate

A plate cost (or recipe cost) is the total cost of every ingredient in one portion. To calculate it:

1. List every ingredient, including oil, spices, garnish, sauces and sides.
2. Use real purchase prices from your latest supplier invoices.
3. Adjust for yield. Trimming, bones and cooking loss mean you use more than the finished weight. If 1 kg of raw chicken gives 700 g of usable meat, the true cost per usable gram is higher than the invoice suggests.
4. Weigh the portion you actually serve, not the one you intend to.
5. Add packaging for takeaway and delivery items.

Here’s a worked example for a chicken machboos plate. The prices are illustrative, not quotes.

Step 2: Use a target food cost percentage

The two formulas every operator uses:

• Food cost % = plate cost ÷ selling price (before VAT) × 100
• Starting price = plate cost ÷ target food cost %

With a target of 30%, the machboos above works out at 10.50 ÷ 0.30 = AED 35.00 before VAT. Add 5% UAE VAT and the menu price is AED 36.75, which you might round to AED 37.

Typical targets vary by concept, but these rules of thumb are a common starting point:

Step 3: Look at cash margin, not just percentage

Percentages can mislead. Compare two dishes:

The fish has a worse percentage but earns AED 10 more per plate. Rent and wages are paid in dirhams, not percentages, so track both.

Step 4: Keep an eye on prime cost

Prime cost is food and beverage cost plus labour. Many operators aim to keep it at roughly 60 to 65% of sales, leaving room for rent, utilities, marketing and profit. If your prime cost runs higher, look at portion sizes, waste, scheduling and prices together. Our guide to restaurant startup costs in Dubai covers the fixed costs your margins must pay for.

Step 5: Price delivery separately

Delivery platforms charge commissions and marketing fees on each order, and delivery needs packaging. Work out profit per dish after those costs. For example, if a platform charges an illustrative 25% on an AED 37 dish, that’s about AED 9.25 before packaging. Many restaurants set a separate delivery menu with adjusted prices or portions; check your platform contract for any pricing rules first. Our guide to food delivery apps in the UAE explains the fee models.

Step 6: Engineer the menu

Menu engineering sorts dishes by popularity and cash margin:

Review this every few months using your point-of-sale data.

Menu design that supports your prices

• Keep the menu focused. Fewer dishes mean less waste and faster service.
• Describe dishes well. Origin, method and key ingredients add perceived value.
• Place high-margin dishes where eyes land first, such as the top of a section.
• Avoid long columns of prices, which encourage guests to shop by price alone.
• Make changes easy. If you update prices often, switching to digital menu boards saves reprinting.

Keep reviewing

• Update plate costs when supplier prices change, and do a full review at least quarterly.
• Compare actual and theoretical food cost each month. A gap points to waste, over-portioning or theft.
• Keep a waste log and adjust prep quantities.
• Use portion tools such as scales, scoops and ladles.

Common pricing mistakes

• Copying competitors’ prices without knowing your own costs
• Forgetting VAT, packaging or delivery commission
• Ignoring yield and waste
• Applying one margin to every dish

Pricing is part of the wider plan covered in our guide to opening a restaurant in Dubai.

Frequently asked questions

What is a good food cost percentage for a restaurant?

Many restaurants target roughly 28 to 35% for food overall, but the right figure depends on your concept, prices and other costs. Track cash margin too.

How often should I change my menu prices?

Review costs at least quarterly and whenever a key ingredient changes price sharply. Small, regular adjustments are easier for guests to accept than rare, large jumps.

Should delivery prices be higher than dine-in prices?

Many restaurants charge more for delivery or adjust portions to cover commissions and packaging. Check your platform agreement before you set different prices.