Menu costing in most businesses ends with adding up ingredient prices. That calculation usually shows 70 to 80 percent of the real cost.
What separates gross from net cost?
Gross cost is the purchase price per kilogram.
Net cost is the cost of the portion of that product you can actually use.
Trim loss sits between them.
A kilogram of whole chicken may cost 120 lira; but once bone, skin and trim are removed the usable meat is 600 grams.
The real cost of that usable meat is therefore 200 lira a kilogram.
Net cost is 1.67 times gross.
That gap exists in every product, and ignoring it distorts the whole calculation.
Trim loss varies markedly by product.
It needs measuring once and recording for each one.
How is trim loss measured?
The measurement is simple and done once.
The product is weighed; that is the gross weight.
Cleaning, trimming and cutting are carried out.
The usable portion is weighed again; that is the net weight.
Trim loss is the difference divided by the gross.
Example: 1000 grams of lettuce yields 720 grams after trimming; a loss of 28 percent.
The measurement should be repeated for different suppliers and seasons; as quality changes, so does the loss.
Where losses come out high, the supplier deserves review.
In some cases a more expensive product with lower trim loss is cheaper in net terms.
Pre-prepared products should be assessed with this calculation.
| Product | Typical loss | Net cost multiplier |
|---|---|---|
| Whole chicken | 40% | 1.67 |
| Whole fish | 45-55% | 1.8-2.2 |
| Lettuce, leaves | 25-30% | 1.33-1.43 |
| Onions, garlic | 10-15% | 1.11-1.18 |
| Beef (from a whole cut) | 15-20% | 1.18-1.25 |
| Frozen chips | 0-2% | 1.00-1.02 |
Why is cooking loss calculated separately?
Trim loss occurs before cooking.
Cooking loss is the weight lost during cooking and is a separate line.
Meat releases water and fat as it cooks, losing 20 to 35 percent of its weight.
A cooked portion of 150 grams requires 200 to 220 grams of raw meat.
Without that calculation the portion cost comes out markedly understated.
Cooking loss varies with the method.
It is highest on a grill and lower in poaching.
Long cooking at low temperature reduces it.
That ratio should also be measured once and written on the recipe card.
Vegetables have a cooking loss too, though lower at 10 to 20 percent.
What belongs on a recipe card?
A proper costing card carries eight columns.
The first is the ingredient name.
The second is the net quantity used, as it appears in the recipe.
The third is the trim loss.
The fourth is the gross quantity required: net divided by one minus the loss.
The fifth is the unit price.
The sixth is the ingredient cost: gross quantity times unit price.
The seventh is the total portion cost.
The eighth is the cost ratio: portion cost divided by selling price.
Once that table is set up, a price change means updating only the unit price line and the whole calculation refreshes.
That is why a spreadsheet is practical.
Which lines get forgotten?
Six are commonly skipped.
The first is garnishes: parsley, a wedge of lemon, a lettuce leaf.
Small individually but 2 to 5 lira per portion.
The second is sauces and oil. Olive oil and sauces on the plate go by eye.
The third is bread. Most businesses give it free and never cost it.
The fourth is spices and salt. Low individually but meaningful in total.
The fifth is packaging. In delivery, boxes, bags and cutlery come to 8 to 15 lira per portion.
The sixth is waste and returns. Product that cannot be sold should be distributed across the cost of the portions that are.
Added together, those six typically raise portion cost by 15 to 25 percent.
What should the cost ratio be?
The food cost ratio is portion cost divided by selling price.
The target varies by type of restaurant.
For main courses, 28 to 35 percent is typical.
For drinks, 15 to 25 percent.
For desserts, 20 to 30 percent.
For breakfast and buffets, 30 to 40 percent.
For fast food and delivery, 30 to 38 percent.
Those ratios apply to the menu average rather than to individual lines.
Some lines are sold at a high cost ratio; those serve to attract customers.
Others are sold at a low ratio and carry the margin.
What matters is the weighted average staying on target.
The weighted average is calculated by multiplying each line by its sales volume.
How is pricing done?
Three methods are used.
The first is a cost multiplier. Portion cost is multiplied according to the target ratio.
For a 30 percent target, the cost is multiplied by 3.33.
Simple, but it ignores the market.
The second is market pricing. Competitors' prices set the level and cost is managed to fit.
Aligned with the market but no guarantee of margin.
The third is contribution margin. The gross profit each line delivers is calculated.
A line with a high cost ratio but a high contribution can be more valuable than the reverse.
That method is the most accurate but requires the most data.
In practice all three are used together: the multiplier sets a floor, the market sets a ceiling and contribution guides menu decisions.
Prices and costs should be reviewed quarterly; in an inflationary environment that can fall to monthly.
