How to price a menu item so it actually makes money

Pricing a dish on a hunch is how good restaurants slowly go broke. Here are the three methods operators actually use, and when each one fits.

1. Cost-plus (target food cost)

Start from your ingredient cost and divide by your target food cost percentage. If a dish costs $4.00 and you want a 30 percent food cost, price it at $4.00 / 0.30 = $13.33, then round to a clean menu number.

2. Target contribution margin

Instead of a percentage, aim for the dollars each dish contributes after ingredients. A high-volume item at a lower margin can beat a low-volume item at a higher one.

3. Value-based

What will guests happily pay for this, given your neighborhood and competition? Use this to set the ceiling, then check it still clears your cost target.

When your food cost updates automatically from invoices, you can see the moment a dish slips under target and adjust before the margin is gone.