Everything that comes into your kitchen has a value.
You paid for it and it is your responsibility to minimize waste and maximize profit. Even the trimmings that quickly go into the trash have a value. Taking the time to carefully and properly cost out recipes is the first step in properly costing out menu items. You cannot accurately assign a price to a menu item without knowing what it cost you to produce and serve that item. Guessing at what to charge for an item may cause you to leave profit on the table.
While the process of pricing out a recipe is a simple one, it can be time consuming and there are some considerations that you must be aware of. The beauty of Microsoft Excel can make this a very quick and painless task, though it will take some time up front to setup the spreadsheet accurately. On the download page, you will find many templates and spreadsheets that I have already made to save you the time of having to create your own.
To cost out a recipe, you will first need a list of all the ingredients that make up the recipe. Additionally, the ingredients will need to be accurately measured and identified in their appropriate value such as cup, quart, pound tablespoon.
Each ingredient is then assigned the cost value of that product based on the quantity used in the recipe and the price paid for each ingredient. So if you pay $1.00 per pound for carrots and the recipe calls for 6 ounces you would cost out the value of the carrots using simple math. $1.00 per lb ÷ 16 oz = $ .063 per ounce - 6 oz per recipe x $ .063 per ounce = $ .38
You will need to follow these steps for every ingredient that makes up the recipe and calculate the cost for each ingredient amount. In some situations, you may need to complete this process of costing a recipe within a recipe. An example of this would be in our Chicken dish with Tomato-Caper Relish.
It would be easier to cost out a batch of the Tomato-Caper Relish and then divide that recipe cost by the recipe yield based on the portion size used in the recipe,
than it would be to try to breakdown the ingredients to match the correct portion for the dish. So if it cost $9.55 to make a 2 ¾ lb batch of the Tomato-Caper Relish and you use 2 ½ ounces per entrée, you will get 48 portions per batch costing $ .54 a portion. This is especially helpful if you use this recipe in other dishes. You now have that portion of the dish priced out and you can adjust the cost based on the portion size used in each additional recipe.
Once you have calculated the value for each ingredient used in the recipe, and any subsequent recipes that make up a specific dish, you will then total the cost of all the ingredients to find the overall recipe or portion cost. This can be a time consuming when you have several recipes to cost out, but it is a necessary process. Without knowing exactly what it cost you to produce a recipe, you cannot properly price a dish to ensure you have maximized profit.
This is why I use Microsoft Excel. Once set up properly, Excel will greatly reduce the time it takes to complete this process. I will then save the costed recipes and make changes as cost of goods increase or decrease.
Butcher's Yield Test: It is highly recommended that when costing out meat, poultry and seafood products that complete a butcher's yield test to get and accurate cost. Processing the product will cause you to lose weight with fat, bones and trim, increasing the overall cost of the product. A Piece of beef weighing 10 lbs (AP) as purchased weight, may only yield 8.5 lb (EP) edible portions.
Incidentals: A suggestion to eliminate the need to cost out minimal amounts of spices, herbs or cooking oil is to add a percentage of cost to the overall recipe cost to cover these items. (I will typically use 10% for this number) A recipe costing $3.29 with 10% incidentals would increase the cost of the recipe by $ .33 bringing the new cost to $3.62
Check Pricing: Check your pricing regularly. As the market changes, so will prices. What you priced a recipe out to today may not be the same cost 6 months from now.