Do you want total control over the profit margin for every item when looking at how to price a menu, food or cocktail?
You need recipe costing.
Recipe costing is the act of breaking down a menu item into its individual ingredients and determining those ingredients’ costs.
When totaled, those ingredient costs make up the total food or liquor cost of an item. And when compared to that item’s sell price, it provides the greatest measure of profitability out there: food cost percentage or liquor cost percentage.
Those percentages indicate what amount of an item’s selling price it costs the bar or restaurant to make the item. The lower those percentages go, the more profitable a menu item becomes.
Recipe costing, then, is crucial for the visibility needed to lower your food and liquor cost percentages. Here’s how to do it.
How to Cost Out a Recipe: Recipe Costing Formula
Let’s look at basic recipe costing, then go over an example. We’ll also discuss where recipe costing cards fit in and give you a nice recipe costing template for free.
Basic Recipe Costing
Basic recipe costing is essentially a matter of cataloging ingredients and dividing them by their weight or volume.
The steps for basic recipe costing are:
- Write down every ingredient in the recipe.
- Note the total cost of that ingredient in its wholesale weight or volume.
- List the amount of the ingredient used in your recipe. Be clear with measurements here. You don't want to find yourself asking "(what is 1 part?" later.
- Use your price per wholesale item to calculate the price per unit of the ingredient used. If a half ounce of beef is used, calculate how much one ounce of beef costs.
- Use the wholesale price per unit to calculate the price of the ingredient.
Let’s look at how this plays out in real life. Here’s a costing out a recipe example.
Costing Out a Recipe Example
Consider a negroni, one of the drinks every bartender should know.
- Sweet vermouth
Now the total costs of each ingredient in their wholesale format.That’s however large a single unit that you can purchase from your supplier or B2B marketplace is.
Not that it’s not worth including an orange peel in this recipe cost because it’s too close to zero.
There are 29.57 milliliters in an ounce. Use that figure when calculating ingredient cost. The total ingredient cost for this negroni is $1.59.
You can then use this ingredient cost to reverse engineer a profitable selling price. Most bars want their liquor costs around 15–20%. To hit that, with a $1.59 ingredient cost, this negroni should be priced at around $8.50 to $11.
Recipe Costing Form Example
Here’s a proper recipe costing form example:
If you’re putting together your own recipe costing form, it should look something like the above. But if you’d like to download ours, you can. It can be used for costing out recipe cocktails and food items.
Recipe Costing Template (Excel, Free)
Here’s our free recipe costing template. It’s a simple, free Excel document that you can download and edit based on your business’s needs.
The great part about using a menu and recipe cost spreadsheet template is that it gives you visibility into a menu item’s food cost percentage or liquor cost percentage.
Knowing your ingredient prices is how you lower those percentages—and that’s how you make reliable and consistent profit.
How to Do Recipe Cost Cards
The process of creating recipe costing cards is similar to costing out a standardized recipe on a spreadsheet—which is outlined above. The main difference is that a recipe cost card contains only one recipe, is typically laminated, and is stored in a place accessible to kitchen staff. That’s because they’re often consulted by the folks prepping meals.
Recipe Costing Software
The easiest way to calculate recipe cost, though, is using recipe costing software. It’s one of the most useful restaurant technologies out there.
What Is Restaurant Recipe Costing Software?
Recipe costing software automates this whole process. Which is a godsend because crunching the numbers for every ingredient for every recipe is time consuming and error-prone.
Here’s how recipe costing software works:
You create a recipe and enter the ingredients and menu price. The system takes care of the rest. You’ll be given a breakdown of total ingredient cost and food or liquor cost percentage based on the item’s sell price.
The benefit of this is that it’s dynamic and stored in one central dashboard. It does all the calculations for you immediately and lets you spend more time strategizing about how to lower those cost percentages.
BinWise Costs Your Recipes
BinWise—an industry-leading bar inventory software—has been helping beverage programs across the globe with recipe costing for years. Our Recipe feature breaks down the ingredients, cost, and profitability of every cocktail on a menu.
By having such a granular report right at your fingertips, you’re able to tweak recipes to cultivate profit consistently and reliably so you never fall below the break even cost.
That may mean finding cheaper ingredients that don’t impact the overall quality of the drink. That may mean getting better deals from your vendors. It may mean removing needless garnishes or increasing menu prices.
We’ve got a bunch of great content on pricing, too:
Pricing strategies, informed by cost percentages, turn menus into profit engines. And it all starts from knowing exactly what’s in your drinks and how much each ingredient costs.