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How to do recipe costing in a restaurant?

How to do recipe costing in a restaurant?

When undertaking a gastronomic business, it is common for estimated costs of the dishes to be made and that these vary as they go along, but this is a practice that can put the profitability of the business and the trust of your customers at risk.

 

For this reason, in this blog article we will show you how to perform recipe costing in your restaurant using three different techniques, as well as some recommendations to start implementing it in your business from now on.

What is recipe costing and what is its importance?

Recipe costing is the exact calculation of the value of the raw material and all the expenses involved in making a dish, and therefore, the total amount of money it costs to prepare it. Obtaining the cost of recipes in a restaurant is important because it allows:

Reduce waste

One of the most important points of having a recipe costing is that it helps to reduce waste, because by knowing what is really used in the kitchen, you can know exactly how much to buy, avoiding acquiring unnecessary inputs that may expire or decompose.

It may interest you: Reduce the waste of your restaurant! 6 ways to do it with Soft Restaurant®

Calculate actual costs

Recipe costing helps to know how much is being invested not only in supplies, but in everything that is generating a cost for the restaurant (electricity, water and gas, for example) for each dish that is prepared, which helps to identify where the highest costs are being generated to make better decisions.

Define the sale price

Having an established recipe costing helps to set the sales price accurately, including important elements such as income tax (VAT), labor, indirect production costs and everything else necessary to obtain a price of sale that ensures the profitability of the business.

Standardize recipes

The standardization of recipes refers to the creation of a kitchen process for the preparation of a specific product. When you don't have a recipe costing, it's very easy to make mistakes because a suitable process for preparation cannot be developed. On the contrary, when you have recipe costing, the process becomes much easier. 

What does it take to do a recipe costing?

Methods for costing recipes in a food business

To be able to do a recipe costing, it is necessary to previously know some key elements of the restaurant, such as:

  • The food and beverage menu (which is the best-selling product or the one that represents the highest cost, for example).
  • The production processes and processing times. 
  • Production costs (ingredients and prices of raw materials).
  • Labor costs (production wages).
  • Indirect manufacturing costs (electricity, water, gas, etc.).

It is also advisable to perform only one standard recipe per dish or drink and that it is only modified when input costs need to be updated.

It may interest you: What makes a restaurant profitable? Interview with AMS Consultoría

What methods can you use to cost your recipes?

There are various methods for costing recipes in a restaurant, from generating excel formats to using apps mobile and software specialized in food and beverage business management. Here we present the most common:

Manual costing 

Manual recipe costing is the most common in businesses that are in the process of being formalized, but it is also the most complicated and laborious. It is usually done in an Excel sheet in which you assign information such as:

  • Name of the person responsible for the recipe
  • Recipe name
  • Recipe cost date
  • Recipe code
  • Portions to be made according to the number of people 
  • Code for ingredients and supplier catalog
  • Recipe ingredients
  • Calculation of specific amounts used in the recipe
  • Unit prices per standard measure (kilogram or liter)
  • Total cost of raw material
  • Calculation of contingencies and total investment
  • Management cost and elaboration fees
  • Cost per serving
  • Profit to be obtained per portion
  • Sales price without tax
  • Sales price with taxes
  • Final sale price per serving

An example of manual costing is the one presented by chef Paul Garma Escamilla, from El Kraken restaurant, in Puebla, in the following video:

App costing

Currently there are various mobile applications that allow you to register a recipe with the ingredients used in it and the price of each one. They generally have a simple operation whereby the user adds the products, creates the recipe with the registered ingredients, selects them and the app calculates the total cost of the investment.

Although they usually include important elements such as the profit margin in percentage, the option to update the prices of the inputs and the currency exchange, their weak point is that your options are usually limited for the huge number of variables that come into play in the restaurant operation.

Software restaurateur

Use of soft restaurant to generate the cost of recipes in a restaurant

Un software for restaurants like Soft Restaurant® has specific functions that allow you to register the recipes and perform the costing of each one precisely by simply performing the following steps:

  • Add the products in the supplies catalog: This is where all the inputs that will be part of the various recipes of the business are captured.
  • Create the recipe: The list is filled with the ingredients or supplies with which the product is made and the prices of each one.
  • Add comments: This field is to add a comment for the recipe, for example, the way of preparation (facilitating the standardization of recipes)
  • Show recipe costing: Calculate the cost of the recipe depending on the price of the products that make it up.

If a restaurant wants to know the cost of its registered recipes, it can use the recipe report both products and processed inputs. When consulting this report, you can decide to view the cost based on the average cost or the last cost.

In addition, when configuring a recipe in the system, it is automatically indicated which inputs will be used and in what quantities will be discounted from the inventory when selling said product making it easier to keep track of inventory.

You may also like: How to keep inventory control in a restaurant?

¡Make the costing of your recipes easily and precisely!

As you can see, the easiest way to costing recipes in a restaurant is with the help of a software restaurateur, as he is a system designed to reduce manual procedures and maintain total control over all operations carried out in the restaurant, helping to optimize procedures, increase productivity and increase business profitability.

If you are still undecided between purchasing a system like this or continuing to perform your calculations manually, we invite you to take the following quiz that will help you discover whether or not your business is ready to take the next step.It will only take a few minutes!

Quiz to find out if your business is ready to implement a software for restaurants