How to work out food cost percentage (with a worked example)

23 October 2026 · 2 min read

Food cost percentage tells you how much of each sale goes on the ingredients in that dish. It is one of the simplest numbers you can track, and it is a quick way to spot a dish that has quietly stopped paying its way after a supplier price rise.

The formula

Food cost % = cost of ingredients per portion ÷ selling price before VAT × 100

The "before VAT" part matters. If you are VAT registered, part of every menu price belongs to HMRC, not to you. Using the VAT-inclusive price makes your food cost look lower than it really is.

To take 20% VAT out of a menu price, divide by 1.2 (current rates are on GOV.UK: VAT rates). For 5% VAT, divide by 1.05. If you are not VAT registered, use the full price.

A worked example

Here is an example bacon butty (example figures, not real supplier prices):

Menu price: £5.50 including 20% VAT.

1. Price before VAT: £5.50 ÷ 1.2 = £4.58
2. Food cost %: £1.39 ÷ £4.58 = 30%
3. Gross profit (GP) per portion: £4.58 minus £1.39 = £3.19
4. Gross margin: £3.19 ÷ £4.58 = 70%

Costing ingredients properly

• Cost by the unit you use. If a 1 kg tub of butter costs £8.00, that is 0.8p per gram, so 10 g costs 8p.
• Allow for waste and trim. If you lose 20% of a bunch of herbs to stalks, your usable cost per gram is higher than the label suggests. Divide the pack cost by the usable amount, not the bought amount. Our guide to yield and food waste explains how.
• Include packaging. Takeaway boxes, cups, lids and napkins are real costs per sale.
• Use your latest invoice price. Costings go stale fast when prices move.

What is a "good" food cost %?

There is no single right figure. It depends on your rent, staff costs, how busy you are and what you sell. A drink might run at a very low food cost while a generous main runs much higher. The useful habit is to pick a target margin for your business, cost every dish the same way, and check the dishes that fall below it.

Turning a target into a price

If you want a 70% margin, the price before VAT is cost ÷ (1 minus 0.70). For the butty: £1.39 ÷ 0.30 = £4.63 before VAT, or £5.56 with 20% VAT added. You might then round to a tidy menu price. See pricing your menu with VAT for which rate applies.

Try it

The free Dish Profit Calculator does all of the above for one dish, with no sign-in. PDF costings you can share with your team come with Chef Plan.

This article is general guidance, not financial or tax advice.

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