Common Mistakes to Avoid in Menu Costing for Restaurants

Menu costing is essential for every successful food business, helping ensure each dish is priced to cover expenses while generating a fair profit. Menu pricing goes beyond ingredient costs; it reflects the brand’s value, the customer experience, and the time and effort invested in each dish. Even experienced restaurateurs and chefs can make costly mistakes in this area, which may impact their bottom line and customer satisfaction.
This guide will help you identify and avoid common menu costing mistakes, improve profitability, and maintain competitive pricing—all while offering fair value to customers. By understanding these pitfalls, you’ll be better equipped to make informed pricing decisions that drive your business toward long-term success.
1. Overlooking Ingredient Costs
One of the most common pitfalls is failing to account for every ingredient. While the main components—proteins, vegetables—are tracked, minor ingredients like spices, oils, and garnishes are often overlooked. Even small quantities add up, significantly impacting your overall food costs over time.
Actionable Tip: Break down each recipe to include every ingredient, regardless of its quantity. For example, tracking the cost of a tablespoon of olive oil or a pinch of salt ensures precise pricing. Consider using software like Open Pantry’s Restaurant Pro Suite, which allows you to enter each ingredient cost, offering a clear view of your real expenses.

2. Inconsistent Portion Control
Inconsistent portion sizes can lead to fluctuating costs and shrinking profit margins. When staff members serve varying amounts of the same dish, it becomes nearly impossible to maintain accurate menu costing. Inconsistencies may also result in customer dissatisfaction from portion disparities.
Solution: Implement strict portion control by using tools like portion scales or pre-measured containers. Develop visual aids or standard operating procedures (SOPs) to ensure staff consistency. Consistent portioning not only keeps your food costs predictable but also enhances the customer experience by offering dependable portion sizes.
3. Ignoring Waste and Spoilage
Ignoring waste and spoilage is a costly mistake. Ingredients lost during preparation or through spoilage add hidden expenses, which can quickly erode your profits if left unaccounted for.
Best Practices: Regularly track inventory and monitor food waste by introducing an inventory management system, like Open Pantry’s tool, which logs stock levels and expiration dates. Adjust your costing to factor in these losses. For instance, if you lose 5% of an ingredient batch to spoilage, include this percentage in your menu costing to avoid underpricing.

Read the article Mastering the Art of Restaurant Inventory Management.
4. Failing to Update Costs Regularly
Ingredient costs can fluctuate significantly. When you don’t update your menu pricing to reflect these changes, you risk underpricing your dishes, which can erode your profit margins.
Pro Tip: Set a schedule to review and update your ingredient costs quarterly, if not monthly. A menu pricing tool can automate this process by updating costs as they change. This practice keeps your menu competitive and ensures prices accurately reflect the cost of ingredients.
5. Neglecting Labor Costs
While ingredient costs are a primary focus in menu pricing, labor costs are just as essential. Each dish takes time and skill to prepare, and ignoring labor costs can result in underpricing.
What to Do: Calculate labor costs per dish, especially for time-intensive recipes. For instance, assign a labor cost per minute, then multiply it by the preparation time for each menu item. This approach ensures that your pricing covers both the cost of ingredients and labor, supporting sustainable profitability.
Read the article How to Calculate Menu Costing.

6. Not Considering Overhead Expenses
A significant oversight in menu costing is failing to account for overhead expenses, such as rent, utilities, and equipment maintenance. These operational costs add up and impact profitability if not included in pricing calculations.
Cost-Effective Strategy: Determine your monthly overhead expenses and distribute these across your menu items. For example, if rent is $5,000 monthly, divide this amount by the estimated number of dishes sold to assign a portion of overhead to each dish. This allocation ensures your pricing covers both the direct and indirect costs, leading to more accurate profit margins.
7. Underestimating Pricing Strategy
Relying solely on food costs to set menu prices can lead to missed opportunities. Market positioning and customer expectations should influence pricing decisions to balance profit with customer satisfaction.
Market Research Tip: Research competitors’ pricing to gauge what customers are willing to pay. For example, if similar restaurants price a dish at $20, this suggests a price range that customers may accept. Adjust your prices based on this research while ensuring they cover costs. A balanced approach enhances customer satisfaction and keeps your menu competitive.
Read the article How to Cost a Menu: A Step-by-Step Guide for Restaurant Owners.

8. Overlooking Menu Engineering
Menu engineering is a powerful tool that categorises menu items based on profitability and popularity, helping maximise revenue. Without analysing these factors, you risk maintaining an unbalanced menu that doesn’t reflect your offerings' financial performance.
How to Use Menu Engineering: Analyse each item’s profitability and popularity to identify “stars” (highly profitable and popular items) and “plow horses” (popular but less profitable items). Promote your stars on the menu and consider removing or adjusting underperforming dishes. This analysis helps optimise your menu to boost revenue and satisfy customer demand.
Key Takeaways
Avoiding these common menu costing mistakes is crucial for running a profitable and sustainable restaurant. By focusing on every detail—from ingredient costs and labor to overhead expenses—you can ensure that your menu is priced accurately and remains competitive in the marketplace.
For further support, consider using Open Pantry’s Restaurant Pro Suite, a comprehensive tool that simplifies menu costing, inventory management, and cost tracking. With Open Pantry, you can confidently set prices that enhance profitability, deliver value to customers, and protect your bottom line.