Food cost per dish is the total cost of the ingredients in one recipe batch divided by the number of portions it makes. Divide that cost by the selling price to get your food cost percentage, and set menu prices so this percentage stays at the target you choose for your restaurant.
Use the free VAT calculator to split a VAT-inclusive price into price and VAT.
Why should a restaurant cost every dish?
Pricing by looking at the place next door works until meat or oil prices rise and your busiest dish quietly starts losing money. Costing each dish from its recipe shows how much of every sale goes on ingredients.
How do you calculate the cost of one dish?
Include the small things — oil, spices, achar, garnish — because they add up. Then add a small allowance (for example 5%) for trimming, spillage and plates that go wrong.
A worked example: buff momo
One batch makes 100 momo, served 10 to a plate, so 10 plates. Prices below are illustrative; use your own bills.
| Ingredient | Quantity | Rate | Cost |
|---|---|---|---|
| Buff mince | 1.5 kg | Rs 500 per kg | Rs 750 |
| Flour | 1.5 kg | Rs 80 per kg | Rs 120 |
| Onion, cabbage, garlic, ginger, spices | — | — | Rs 150 |
| Achar (tomato, sesame, chilli) | — | — | Rs 130 |
| Oil and other | — | — | Rs 50 |
| Batch total | Rs 1,200 |
- Cost per plate: Rs 1,200 ÷ 10 = Rs 120
- With a 5% waste allowance: Rs 120 × 1.05 = Rs 126
What is food cost percentage?
Food cost % = cost per plate ÷ selling price × 100.
If the momo sells for Rs 320 a plate, food cost is Rs 126 ÷ Rs 320 = 39%. The remaining 61% has to pay staff, rent, gas, electricity and other costs, and leave a profit.
There is no single correct percentage — tea shops, fine dining and fast food all differ. Track your own over a few months and set a target that leaves a profit after all costs.
What about VAT?
If your restaurant is VAT-registered, part of the money the customer pays is VAT that belongs to the government. Work out food cost against the price without VAT.
If Rs 320 includes 13% VAT, your own revenue is Rs 320 ÷ 1.13 = Rs 283.19, and food cost becomes Rs 126 ÷ Rs 283.19 = 44.5% — not 39%. Forgetting this is a common reason menus look profitable on paper but aren't.
How VAT and any service charge may be shown on menus and bills has been the subject of government notices and court cases in Nepal, so check the current rules with the Inland Revenue Department and the Department of Commerce, Supplies and Consumer Protection before printing a menu. See VAT in Nepal.
How do you keep food costs under control?
- Update costs when purchase prices change — at least monthly for meat, oil and vegetables.
- Standardise portions with a scoop, scale or set number of pieces.
- Count stock regularly and compare usage with sales. See stock counting and shrinkage.
KhataIN Business has a restaurant module for table orders, kitchen tickets and bills, alongside inventory for ingredients — try it at business.khatain.com.
Frequently asked questions
What is a good food cost percentage for a restaurant in Nepal?
It depends on the type of restaurant, the menu and your other costs. Rather than copying a number, calculate your own percentage dish by dish and month by month, and choose a target that leaves a profit after staff, rent, utilities and other expenses.
Should gas and electricity be included in food cost?
Usually not. Food cost covers ingredients only. Gas, electricity, staff and rent are operating costs that the rest of the price has to cover, so keep them separate and review them in your monthly profit and loss.
Do I calculate food cost on the price with or without VAT?
Without VAT. If you are VAT-registered, the VAT in the menu price is collected for the government, not earned by your restaurant, so dividing cost by the VAT-inclusive price makes your food cost look lower than it really is.