For restaurant owners, recipe costing is an ongoing operational concern. Savvy managers understand that as food costs change, so will individual recipe costs. Keeping up with these price fluctuations can take considerable time away from other operational tasks, but ignoring these regular price changes can send your food costs spiraling out of control.
Fortunately, a healthy understanding of the process and importance of recipe costing can help improve efficiency while maintaining tight cost controls. This process involves calculating the total cost of ingredients for each dish on your menu, then using those costs to set appropriate pricing, manage your food expenses, and ensure a healthy profit margin. This guide will help demystify the process of recipe costing and provide helpful tips for maximizing efficiency with your cost management process.
What is Recipe Costing?
Recipe costing, simply put, is the process of calculating the total spent to prepare a single serving of a particular dish. It starts with the recipe itself; operators then itemize the cost of each ingredient used in the dish, adjust the ingredient cost for portion size, and then sum these amounts to determine the total cost of the dish.
Operators can then use dish costs to set menu prices that generate profit while also absorbing ancillary costs, such as labor, waste, or other operational expenses. If your menu prices are already set, recipe costing can help you compare the dish costs to your listed menu prices to ensure they are still profitable, especially as your ingredient costs rise.
Getting Started with Recipe Costing
To begin costing out all of your menu items, first you’ll need to gather some preliminary information. While estimates may serve for some of these figures, precise numbers will paint a more accurate picture of costs at play.
For your costing process, you will need:
- A current inventory count. Take a physical inventory count of all ingredients and supplies on hand, recording the quantities and purchase prices of each item. If you use an automated inventory management solution, you can easily retrieve or print out a current count from your system.
- An itemized recipe list. This list should include the quantities and ingredients used for each dish prepared in your restaurant. Such a detailed breakdown ensures accuracy in cost calculations and helps maintain consistency in food quality and portion sizes.
- A vendor pricing sheet. Infrequently purchased ingredients, such as shelf-stable canned goods or spices, may have changed price since the last time you bought them. Always use a current price list from your vendor for the most realistic projection of future costs.
How to Calculate Your Recipe Costs
Set aside dedicated time for your recipe costing process to ensure that your calculations are accurate and consistent. You’ll need to complete the following steps for each dish on your menu:
- List all ingredients. Begin by listing every ingredient required for the recipe. Ensure that every component, no matter how small, is included for accuracy.
- Determine ingredient quantities. Identify the precise quantity of each ingredient used in the recipe using any appropriate unit of measurement.
- Find ingredient costs. Refer to your current vendor pricing sheet to note the most recent cost of each ingredient. Your vendor’s ingredient costs may be measured in different units than your recipes, and that’s okay.
- Calculate portion cost per ingredient. Convert the vendor cost of each ingredient into the unit of measure used in your recipe. For example, if sauces are purchased by the gallon but used in ounces within your recipe, convert the cost per gallon to the cost per ounce.
- Sum ingredient costs. Add the costs of all the ingredient portions to find the total recipe cost.
- Calculate the serving cost. If your recipe yields multiple servings (e.g., a pan of lasagna), divide the total recipe cost by the number of portions to determine the cost per serving.
Once you have determined the serving costs for each dish, you should regularly review and update recipe costs to calculate changes in your ingredient pricing; these variations should inform changes to your menu prices, or, if a dish no longer yields profit, changes to menu offerings themselves.
Case Study: Costing Out a Sample Plate
Let’s work through an example. To demonstrate the recipe costing process, we’ll calculate the cost for a single serving of a simple but classic dish—spaghetti Bolognese—according to the above steps.
List Ingredients
- Spaghetti
- Ground beef
- Tomato sauce
- Diced onions
- Spices (salt, pepper, oregano)
Determine Ingredient Quantities
- Spaghetti: 3.5 ounces
- Ground beef: 5 ounces
- Tomato sauce: 3/4 cup
- Diced onions: 4 ounces
- Spices: 1/4 ounce (approx. 1.5 teaspoons)
Find Ingredient Costs
Using the vendor pricing sheet, locate the ingredient cost per bulk unit:
- Spaghetti: $1.20 per pound
- Ground Beef: $3.50 per pound
- Tomato Sauce: $7.00 per gallon
- Onions: $1.49 per pound
- Spices: $9.50 per pound
Calculate Cost per Ingredient
Convert vendor costs into the quantities used for a single serving:
- Spaghetti: (3.5 ounces / 16 ounces per pound) * $1.20 = $0.26
- Ground beef: (5 ounces / 16 ounces per pound) * $3.50 = $1.09
- Tomato sauce: (0.75 cups / 16 cups per gallon) * $7.00 = $0.33
- Diced onions: (4 ounces / 16 ounces per pound) * $1.49 = $0.37
- Spices: (0.25 ounces / 16 ounces per pound) * $9.50 = $0.15
Sum Ingredient Costs
Add up the ingredient costs to determine the total cost of making the recipe:
- Total cost = $0.26 (Spaghetti) + $1.09 (Ground Beef) + $0.33 (Tomato Sauce) + $0.37 (Onions) + $0.15 (Spices)
- Total cost = $2.20
Calculate Serving Cost
Since this recipe yields one serving, the total recipe cost of $2.20 is also the cost per serving.
Best Practices for Managing Your Recipe Costs
Recipe costing is not a “one-and-done” process. If you do not regularly review your prices, you risk selling meals to customers at a price point that actually costs you money. By implementing a few best practices, you can save time while still maintaining tight controls over your food costs.
Standardizing Recipes
Standardizing recipes ensures consistency in ingredient usage, portion sizes, and preparation methods, reducing variability and waste. When recipes are standardized, cooks can follow the same routines and better address portion control measures, regardless of which recipe is up next.
Regular Cost Reviews and Adjustments
Ingredient prices fluctuate, especially for items like produce that may be heavily influenced by weather conditions or product availability. Regularly reviewing your costs and menu pricing helps to ensure that dishes remain profitable. When you catch significant price changes early, you can make timely changes and prevent unexpected cost overruns.
Using Technology to Automate Recipe Costing
Utilizing an automated technology solution streamlines data entry and calculations, reducing the likelihood of human error and saving valuable time. Automated tools can also provide real-time insights at the click of a button, facilitating in-the-moment adjustments to portion sizes, inventory orders, and menu pricing.
Benefits of Automating Your Recipe Costing Process
Automating the recipe costing process can considerably streamline operations and enhance accuracy for restaurant operators. By leveraging technology like Back Office, businesses can automatically calculate ingredient costs, account for waste, and adjust portion costs with minimal manual input. The Back Office Recipe Costing feature automatically updates ingredient prices as new orders are delivered, and it can automatically flag price fluctuations to direct your attention to vital cost control measures.
Recipe Costing with Back Office
Recipe costing is not merely a task; it’s a foundational practice that supports optimal pricing strategies and enhances overall profit margins. For those seeking to elevate their recipe costing processes, automated solutions like Back Office offer an invaluable resource. With features that include automatic price updates, real-time cost adjustments, and detailed cost breakdowns, Back Office simplifies this complex task and empowers operators to focus on delivering profitable dining experiences.
To explore how automated tools can transform your recipe costing and improve operational efficiency, reach out to the experts at Back Office. Contact us today for a free demo and discover the full potential of our innovative technology solutions.
