Guide for restaurant owners
Menu pricing the formulas, with worked numbers
Menu pricing is how you set what each dish sells for so it covers its ingredients, pays its share of labour and rent, and still leaves a profit. This guide gives you the menu pricing formula for each method with worked numbers, the price psychology that has evidence behind it, and a checklist to run before you reprint.
Last updated October 2026 · 9 minute read
Key takeaways
- Price = plate cost ÷ target food cost percentage. A $3.60 plate at 30% sells for $12.00.
- Percentages do not pay rent. Check the money each dish leaves after its plate cost, the contribution margin.
- Cost sets the lowest price you can charge. What customers will pay and what nearby restaurants charge set the highest.
- Most price psychology rests on one study or none. Try the cheap ideas and measure them yourself.
- Raise prices in small steps on part of the menu, and work out how many sales you can lose before you are worse off.
The menu pricing formula is plate cost divided by your target food cost percentage. If a dish costs $3.60 to put on the plate and you want food to be 30% of the price, you charge $3.60 ÷ 0.30 = $12.00. Most full-service restaurants aim for 28% to 35% across the whole menu.
Food cost percentage method
Price = plate cost ÷ target food cost %
- Plate cost
- Every ingredient that leaves the kitchen with the dish, after trim and waste.
- Target food cost %
- The share of the price you allow for food. 30% is written as 0.30.
Worked example
The real cost of trimmed chicken
- Whole chicken breast, per kg
- $7.00
- Usable after trimming
- 85%
- $7.00 ÷ 0.85
- $8.24 per kg
- 180 g portion
- 0.18 × $8.24
- Cost of the portion
- $1.48
Costing the portion at the purchase price gives $1.26. Across a year of chicken, those 22 cents a plate are your margin.
The formula is only as good as the plate cost you feed it. Count the oil in the fryer, the bread basket, the garlic sauce, the lemon wedge and the takeaway box. Then add what you lose to trimming, spillage and plates sent back. Kitchens that skip this step price from a cost that is too low, and the gap comes straight out of profit.
You do not need a spreadsheet for this. The menu price calculator adds up a plate from its ingredients and gives you the price for the food cost percentage you choose.
There are four menu pricing methods worth knowing: food cost percentage, contribution margin, competitor-based and value-based. Cost-based methods tell you the lowest price that works for your kitchen. The other two tell you the highest price your customers will accept. A good price sits between those two numbers.
| Method | How it works | Fits best | Where it goes wrong |
|---|---|---|---|
| Food cost percentage | How it worksPlate cost ÷ target percentage. Fast and easy to teach. | Fits bestA first pass over the whole menu, and cheap dishes. | Where it goes wrongPrices expensive dishes too high and cheap ones too low. |
| Contribution margin | How it worksPlate cost + the money each dish must leave behind. | Fits bestSteak, seafood, wine and anything with a high plate cost. | Where it goes wrongNeeds honest numbers for your monthly costs and covers. |
| Competitor-based | How it worksLook at 3 to 5 restaurants your customers also use, then place yourself among them. | Fits bestDishes everyone sells: a burger, a cappuccino, a hummus. | Where it goes wrongTheir rent and suppliers are not yours. Their price may be losing them money. |
| Value-based | How it worksCharge what the dish is worth to the customer, then test it. | Fits bestSignature dishes, a view, anything a customer cannot get nearby. | Where it goes wrongHard to guess. You find the limit only by moving the price and watching sales. |
Pasta arrabbiata
Sells for $11, costs $3 to plate
- Food cost
- 27%
- Contribution margin
- $8
Better food cost percentage
Sirloin steak
Sells for $32, costs $14 to plate
- Food cost
- 44%
- Contribution margin
- $18
$10 more per plate towards your costs
The contribution margin method, with numbers
Add up everything you pay in a month that is not food: wages, rent, power, fuel, repairs. Say it is $24,000, and you want $3,000 of profit. That is $27,000 to find. If you serve 3,000 covers a month, each cover has to leave $27,000 ÷ 3,000 = $9.00 after its food is paid for. A customer who orders a main, a drink and half a starter can get there several ways, so set a margin target per dish type: for example $6 on a main, $2 on a drink and $2 on a starter.
This is why the steak in the cards above is the better dish at a worse percentage. A menu priced purely to 30% would put that steak at $46.67, and it would stop selling.
Use them in this order
- Run the food cost formula on every dish to get a floor.
- Check the contribution margin on anything with a plate cost above about $6.
- Compare with what nearby restaurants charge for the same dish.
- Push your signature dishes above that range in small steps and watch what sells.
Most menu pricing psychology you read online rests on one small study, or on none. A few ideas have been tested in real restaurants and are cheap to try. Others, like the sweet spot in the top right corner, have been tested and did not hold up. Here is what we could check.
| The claim | What was found | Evidence |
|---|---|---|
| Drop the currency sign | What was foundCornell researchers tested three price formats on 201 lunch customers at one restaurant in 2009. Checks were about 8% higher with plain numerals than with a $ sign or the word dollars. The authors warned it may apply only to that restaurant at lunch. | EvidenceOne study |
| First and last in a list sell more | What was foundIn 2011, Hebrew University researchers moved items around within their category, in a lab test and in a real cafe. Items at the top or bottom of a list were ordered more often than the same items in the middle. | EvidenceField evidence |
| The top right corner is a sweet spot | What was foundA 2012 eye-tracking study found that people read a menu like a book, from the top left, page by page. It found no sweet spot. | EvidenceWeak or none |
| An expensive dish makes the rest look cheap | What was foundAnchoring shows up in lab studies of how people choose. We did not find a solid study that measured it on a real restaurant menu. | EvidenceWeak or none |
| Prices ending in .99 sell more | What was foundThe restaurant research is mostly surveys about how prices are perceived, not sales. Treat it as a style choice: round prices suit a sit-down restaurant, .95 or .99 suits a counter. | EvidenceWeak or none |
| Descriptive names lift sales by 27% | What was foundThe figure comes from one six-week test in a university cafeteria, by a researcher who later had other papers retracted. Clear descriptions are still worth writing. Do not plan around the number. | EvidenceWeak or none |
The practical reading: put the dishes you most want to sell first or last in their section, try plain numerals if your menu shows one currency, and spend the rest of your effort on plate costs. A correct price on a dish people like will do more than any layout trick.
Descriptions do matter for a plainer reason: people order what they understand. See the guide to menu descriptions.
Raise prices in small steps, on part of the menu, and leave alone the few prices your regulars know by heart. Before you change a price, work out how many sales of that dish you could lose and still come out ahead. For most dishes the answer is more than you expect.
How many sales you can afford to lose
Break-even drop = increase ÷ (current margin + increase)
- Increase
- How much you add to the price, in money.
- Current margin
- Today's price minus plate cost.
Worked example
Shish taouk from $13.00 to $13.65
- Increase (5%)
- $0.65
- Current margin ($13.00 − $3.60)
- $9.40
- $0.65 ÷ ($9.40 + $0.65)
- 0.065
- Sales you can lose and break even
- 6.5%
Sell 200 plates a week today and you are ahead unless you drop below 187. In practice you would print $13.50.
- Go small and regular. Two rises a year of 3% to 5% are noticed less than one of 10%.
- Raise unevenly. Leave the coffee, the hummus and the lunch offer alone, and move the dishes customers have no fixed price for in their head.
- Rework before you reprice. A smaller garnish, a different cut or one less side can protect a price that matters.
- Change the whole menu at once. A sticker over one old price tells every customer what happened.
- Give your team one honest sentence to say if asked, such as: our lamb supplier put prices up in the spring.
- Watch each dish for four weeks. If its weekly sales fall and stay below your break-even number, move the price back.
A small rise adds up. If half your dishes go up by 4%, your average check rises about 2%. On an $18.00 check that is 36 cents, and across 3,000 covers a month it is $1,080 with no change to your food cost.
When the exchange rate moves or you sell in two currencies, price in the currency you buy your ingredients in and treat the other as a conversion. Decide in advance what movement triggers a reprice, so a bad week does not turn into a month of selling below cost.
Worked example
An imported ingredient goes up 8%
- Lamb chops, plate cost
- $9.50
- Supplier rise of 8%
- $10.26
- To hold 35%: $10.26 ÷ 0.35
- $29.31
- New menu price
- $29.50
Leaving the price at $27.00 takes the dish to a 38% food cost and costs you 76 cents a plate.
Check the rule before you print
The rules in Lebanon on which currency a menu and a bill must show have changed more than once since 2022. Read the current Ministry of Tourism circular, or ask your syndicate, before you print prices in a second currency.
- Keep a list of your ten biggest ingredients by spend, with the price you last paid. Check it on the same day every week.
- Set a trigger. For example: reprice any dish whose plate cost has moved more than 5% since the menu was printed.
- If you show two currencies, name which one is the price. Print the rate you converted at and the date beside it.
- Round converted prices to figures people can read and pay: 450,000, not 447,500.
- Keep prices off anything expensive to reprint. Use an insert, a board, or a digital menu you can edit yourself.
- Quote suppliers and staff in the same currency you price in, so your costs and your prices move together.
On a printed menu, a new price waits for the printer. On a tamr menu you change it yourself in the menu editor, and a published menu updates within about 30 seconds. The AI waiter quotes prices from the same dish cards, so the menu and the answers always agree.
See which dishes customers ask about
On Pro, Insights shows what your customers asked and your most loved dishes, which is a good place to start before you move a price.
The menu and the AI waiter are free
Upload your menu as a PDF or a photo, or import it from a link, and check the prices before it goes live.
Run this checklist before you reprint or republish. It takes an afternoon the first time and about an hour after that, because the plate costs are already written down and you are only updating what changed.
- 1Write a plate cost for every dish, with trim and waste counted.
- 2Run the formula at your target food cost percentage to get a floor price.
- 3Work out the margin each cover must leave: monthly costs plus profit, divided by covers.
- 4Check the contribution margin on every dish with a high plate cost.
- 5Note what 3 to 5 nearby restaurants charge for the same dishes.
- 6Set final prices, then check the blended food cost across what you really sell.
- 7Put the dishes you most want to sell first or last in their section.
- 8Pick the three or four prices regulars know by heart and leave them alone.
- 9Work out the break-even drop for every dish you are raising.
- 10Set a date four weeks out to compare sales per dish, and a trigger for the next reprice.
Ready to run your own numbers? Open the menu price calculator
What is the menu pricing formula?
The basic menu pricing formula is plate cost divided by your target food cost percentage. A dish that costs $3.60 to put on the plate, priced for a 30% food cost, sells for $3.60 ÷ 0.30 = $12.00. Plate cost means every ingredient on the plate, with trim and waste counted, plus the bread, sauces and garnish that go out with it.
What is a good food cost percentage for a restaurant?
Most full-service restaurants aim for a food cost between 28% and 35% of sales across the whole menu. It is a rule of thumb, and the right figure depends on your rent, your labour and what you sell. Judge the blend across the menu: a steak at 40% and a hummus at 15% can sit on the same menu and average out near 30%.
What is the difference between food cost percentage and contribution margin?
Food cost percentage is the plate cost divided by the price. Contribution margin is the price minus the plate cost, in money. A pasta that costs $3 and sells for $11 has a 27% food cost and an $8 margin. A steak that costs $14 and sells for $32 has a 44% food cost and an $18 margin. The steak has the worse percentage and pays $10 more per plate.
How often should I change my menu prices?
Check your plate costs every month and reprice when a main ingredient or your exchange rate moves by more than about 5%. For planned increases, two small rises a year of 3% to 5% on part of the menu are easier on regulars than one large rise on everything. If you print your menu, keep prices on an insert so a change does not mean a full reprint.
Should I remove the currency sign from my menu?
It is cheap to try, and the evidence is one study. In a 2009 Cornell test with 201 lunch customers at one restaurant, checks were about 8% higher when prices were plain numerals with no currency sign or word. The researchers said the result may apply only to that restaurant at lunch. If your menu shows two currencies, keep the signs so nobody is confused about which is which.
How do I price a menu in two currencies?
Pick one currency as the real price, usually the one you buy your ingredients in, and show the other as a conversion. Print the rate you used and the date, round the converted price to a clean figure, and decide in advance what movement in the rate triggers a reprice. Check the current rules in your country on which currency a menu and a bill must show.
Is there a free menu price calculator?
Yes. The tamr menu price calculator works out the plate cost of a dish from its ingredients and gives you a price for the food cost percentage you are aiming for. It is free. Use it with the menu engineering matrix to see which dishes are both popular and profitable.
Upload your menu as a PDF or a photo, or import it from a link. Edit any price yourself, and your customers see it about 30 seconds later. Free to start, no card.
