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Do you want total control over the profit margin for every item when looking at how much do bars make, how to price a menu, food, or cocktail drinks? 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. It can even help offset the cost to open a bar.
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 bar 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 (see: what is wholesale) 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.
- Gin
- Sweet vermouth
- Campari
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 basic bar drinks 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 bar and restaurant profit margin.
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 back of house staff.
That’s because they’re often consulted by the people prepping meals. The various types of chefs in the kitchen provide input for their creation and refer to them when necessary.
What Is Restaurant Recipe Costing Software?
The easiest way to calculate recipe cost, though, is using recipe costing software. Your restaurant manager and executive chef may already be familiar with it. It’s one of the most useful restaurant technologies out there.
Recipe costing software automates this whole process, which is a godsend. Crunching the numbers for every ingredient for every recipe is time-consuming and error-prone.
How Recipe Costing 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 and restaurant expenses.
Recipe costing is the process of calculating the total cost of all ingredients used to create a menu item. It includes everything from the main components to garnishes, seasonings, and cooking oil.
Like variance reporting and other restaurant KPIs, Understanding your cost per dish is critical to setting profitable menu prices and minimizing waste. For instance, the cost of recipes plays a serious role in the overall profitability of bars.
To determine the profitability of cafes or restaurant pop up ideas, create a basic recipe cost formula that looks like this:
Ingredient Cost per Unit × Quantity Used = Ingredient Cost
→ Total all ingredient costs = Recipe Cost
→ Add Labor + Overhead = Total Plate Cost
→ Set Menu Price to Achieve Target Profit Margin
Try our free beverage spreadsheets and explore menu customization to prepare your calculations and decide on recipes.
Why Recipe Costing Matters for Profitability
Without accurate recipe costing, restaurants and bars risk underpricing items, wasting ingredients, or overspending on inventory. Benefits of regular costing include:
- Smarter Pricing Decisions: Know your margins before you print the menu.
- Improved Inventory Control: Spot discrepancies between theoretical and actual usage.
- Better Vendor Negotiations: Understand the cost breakdown of key ingredients.
- Increased Staff Accountability: Set expectations on portioning and prep consistency.
- Menu Engineering Insights: Identify which dishes deliver the most profit per plate.
If you’re struggling to calculate food or drink costs manually, BinWise integrates recipe costing into your bar inventory software for real-time visibility.
How to Calculate Recipe Cost Step by Step
Follow these steps to calculate the cost of any recipe:
- List All Ingredients
Include every component—even spices, garnishes, and condiments. - Find Cost per Unit
Determine the price per ounce, gram, or item based on your vendor pricing. - Multiply by Quantity Used
For example, 2 oz of lemon juice at $0.10/oz = $0.20. - Add Labor and Overhead (Optional)
Include prep time, packaging, or energy use if you want total plate cost. - Analyze and Set Pricing
Use a target profit margin or food cost percentage (e.g., 25–35%) to price accordingly.
According to these elements, for example, the sandwich that costs $3.50 to make, will cost $11.67 for good a 70% margin. For more support, check out our guide on how to calculate cost of goods sold across your full menu.
Recipe Costing for Bars and Beverage Programs
Bar managers should apply the same logic to cocktails, types of tea, wines by the glass, and NA beverages. Costing recipes is especially important when dealing with:
- Craft Cocktails with Multiple Ingredients
- Infusions or House-Made Mixers
- Flights or Tasting Menus
- Seasonal Specials with Varying Yields
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.
Frequently Asked Questions about Recipe Costing Calculations
How often should I recalculate recipe costs?
Review costs monthly or whenever vendor prices change, seasonal ingredient shift, and inflation hikes, because these costs can quickly erode margins.
Should I include labor in my recipe costing?
Labor is optional but helpful if you want a more accurate “plate cost," especially for high-prep dishes or specialty drinks. Drinks which are low-effort and low-skill like the trend toward RTD canned cocktails may help balance out more costly dishes and drinks. This is heavily influenced by perceptions like the cultural clout of celebrity alcohol brands, for instance.
What’s a good food cost percentage to aim for?
Most restaurants target 25–35% food cost. For bars, 20%–25% is a common benchmark, but a high-end or fine-dining spot may flex higher much higher rates due to its perceived premium value.