How to price a menu item

Pricing a menu item is part math, part market sense. The math gives you a floor — the minimum price that protects your margin. Market sense tells you whether that floor is realistic in your area and concept.

Getting it wrong in either direction costs you. Price too low and you are subsidizing every sale. Price too high and you lose customers to competitors.

Step 1: calculate cost per portion

Before you can price anything, you need an accurate cost per portion: the total of every ingredient, prep recipe component, and packaging item in one serving. If you have not done this step, there is no reliable way to price.

List every input, find its cost per usage unit (purchase price divided by purchase quantity, adjusted for yield), and sum the line costs.

Step 2: apply the cost-plus formula

Suggested price = cost per portion divided by target food cost %

Example: your grain bowl costs $3.60 per portion. Your target food cost is 30%. Suggested price = $3.60 divided by 0.30 = $12.00.

This is your floor — the price at which you hit your target margin. Selling below this means every sale erodes your margin. Selling above it improves it.

Step 3: sense-check against your market

Your formula gives a mathematically correct price. Now verify it is commercially viable.

Step 4: account for the channel

The same dish sold on DoorDash, Uber Eats, or Grubhub earns you less per sale because of commission fees (typically 15 to 30%). If you price delivery the same as dine-in, you may be underwater on every delivery order.

A common approach: set a delivery price 10 to 20% higher than dine-in to offset platform commissions while staying close enough to the dine-in price that customers do not feel penalized.

Calculate delivery profitability separately using each platform's commission rate, your packaging cost, and any payment or fixed fees.

Use category-level targets

Not all dishes should carry the same food cost target. Drinks and desserts can sustain a tighter food cost than protein mains, because their ingredients are cheaper per gram. Setting category-level targets helps you price each dish category correctly without blending everything into one average.

When to raise prices

Raise prices when your current price is below the cost-plus floor (you are losing margin on every sale), when a key ingredient cost has risen by more than a few percent, or when the dish has been on the menu long enough that the local market rate has increased.

Raising prices by $0.50 to $1.00 is often invisible to regular customers if framed as a menu refresh, not a price increase. Fewer, larger increases cause less friction than many small ones.

Frequently asked questions