Determining your menu price: food cost, margin and VAT explained

Une personne calcule des prix de menu avec une calculatrice et des tickets de caisse

The price you put on your menu determines not only what a guest pays, but also whether you have any margin left at the end of the month. Yet many restaurants still price their dishes by feel, or simply match what the neighbours charge. With a few calculation rules, you turn that into an informed choice.

What is food cost percentage?

Your food cost percentage is the share of your selling price that goes towards buying ingredients. If a dish costs you £4 to buy in and you sell it for £14, your food cost percentage is roughly 29%. Most hospitality businesses aim for a percentage between 28% and 35%, depending on the type of dish and concept.

If your percentage is structurally higher than 35%, you’re eating into your margin. If it’s lower than 28%, your dish may be priced too high for what guests expect.

Margin versus food cost percentage

There are two ways to look at pricing:

Food cost percentage: you decide upfront what percentage of the selling price may go towards ingredients, and calculate the selling price from that.
Margin: you decide what percentage of profit you want to make on the selling price, and work backwards from there.

Both methods come down to the same thing, but give a slightly different perspective. Some owners prefer to think in terms of “what can it cost”, others in “what do I want to keep”.

VAT: which rate applies?

For food and drink served on-site, a reduced VAT rate typically applies. Alcoholic drinks usually fall under the standard rate. This difference matters for your price calculation, especially if you offer a combined menu with a wine pairing.

Calculate your menu prices yourself

Rather than working this out by hand, use the free menu price calculator. Enter your cost price, choose your desired margin or food cost percentage, and you’ll instantly get the recommended selling price including and excluding VAT, plus a comparison against the hospitality average.

Managing prices and your menu together

Once you know what your dishes should cost, it’s smart to keep your menu digital and up to date. That way you adjust prices without having a new menu printed, and your menu stays machine-readable for search engines and AI search results.