Gross profit per dish beats food cost percentage

Food cost percentage is the most quoted number in a kitchen. It is easy to calculate, easy to compare and easy to set a target for, and most chefs know their figure to the decimal point. It is also a ratio, and a ratio can improve while the business makes less money.

Gross profit per dish measures something different: the cash each plate leaves after its ingredients have been paid for. That cash is what pays the rent, the wages and the energy bill. A menu that leaves more cash per guest is a better menu, whatever its percentage says, and a menu change that lowers the percentage while lowering the cash is a step backwards dressed as progress.

This guide makes the case for gross profit per dish as the main measure of a menu, with a worked example in which the better food cost percentage loses money. It also shows where the percentage still earns its place, and how to use both numbers together. Every figure in it is an example.

Both measures start from the same two numbers: the dish's plate cost, which is what its ingredients cost, and its price before tax.

A dish that costs 4.00 to make and sells for 16.00 before tax has a food cost percentage of 25 and a gross profit of 12.00. A dish that costs 10.00 and sells for 28.00 has a food cost percentage of about 36 and a gross profit of 18.00. The first looks better as a percentage. The second leaves 6.00 more on every plate.

Accountants call the cash figure the contribution: what each sale contributes towards fixed costs and profit. Wikipedia's article on contribution margin explains the general idea. In a restaurant, the variable cost that matters most for each plate is its food, so gross profit per dish is a close working version of it.

An invented venue serves 100 mains on a typical evening, split between two dishes.

Before a menu change, guests order 50 of each. Food cost is 150 for the pasta and 550 for the steak, 700 in total, on sales of 2,250. The food cost percentage is 31.1. Gross profit is 1,550.

The owner, worried about a food cost above 30 per cent, redesigns the menu to push the pasta: a better description, a better position, a server recommendation. It works. Guests now order 70 pasta and 30 steak.

Food cost is now 210 plus 330, which is 540, on sales of 1,950. The food cost percentage falls to 27.7, more than three points better. Gross profit is 1,950 minus 540, which is 1,410.

The percentage improved by 3.4 points, and the evening made 140 less cash, a fall of 9 per cent. Over a year of similar evenings, that is a large sum, lost in pursuit of a better-looking ratio. Nothing in the kitchen went wrong. The menu simply moved guests from a dish that leaves 19.00 to one that leaves 12.00.

A percentage describes the relationship between two numbers, not the size of either. Three consequences follow.

First, bills are paid in cash. Rent, wages and energy do not shrink because a dish has a pleasing ratio. What pays them is the cash left after ingredients, multiplied by the number of guests.

Second, a lower percentage is easiest to achieve by selling cheaper things. The cheapest dishes usually have the lowest percentages, because their ingredients are cheap and their prices have room. A menu that drifts towards them improves its percentage and shrinks its cash.

Third, percentages cannot simply be added or averaged. The menu's overall food cost depends on what guests order, so it moves with the menu mix, even if every dish is made perfectly. Our guide to menu mix explains how the mix moves the overall figure.

None of this makes the percentage useless. It is the right tool for three jobs.

Use the percentage to control costs, and gross profit per dish to decide what to sell.

The most useful single figure for a menu is gross profit per guest: the total gross profit for a period divided by the number of guests. It combines the cash each dish leaves with what guests actually order, and it moves in the direction that matters.

In the example above, gross profit per guest fell from 15.50 to 14.10 when the menu change pushed the pasta. A food cost report would have called that week a success; a gross profit report would have caught the problem at once.

Track gross profit per guest weekly, alongside the food cost percentage. When the two move in opposite directions, believe the cash. Our guide to increasing average spend without raising prices covers the other side of the same figure.

Gross profit per dish becomes most useful when it is set against how often each dish is ordered. That is the idea behind menu engineering: sort dishes into four groups by whether their cash margin is above or below the menu's average, and whether their popularity is above or below what you would expect.

Our guide to menu engineering walks through each group in detail. Notice that the groups are defined by cash margin, not percentage. Run the same exercise on percentages and the steak in the example would look like a problem to fix rather than a dish to sell.

Judging dishes by their cash changes how you price premium items. A premium dish does not need the same percentage as a cheap one; it needs to leave enough cash. A steak at 37 per cent that leaves 19.00 may be the best dish on the menu, and forcing it down to 30 per cent by raising its price may push it above what guests will pay and lose the sales altogether.

Equally, a cheap dish with a low percentage may leave too little cash to justify its place, especially if it takes as long to cook and serve as a more expensive one. Our guide to plate cost shows how to cost each dish properly, and our guide to putting a menu price increase through quietly shows how to use these numbers when prices need to rise.

Promotions are where the percentage misleads most. A discount always raises the food cost percentage, because the cost of the food stays the same while the price falls. Judged by percentage, every promotion looks bad.

Judged by cash, the question is different: does the promotion bring in enough extra guests, or extra spend, to leave more gross profit than the evening would have without it? A two-course offer that fills an empty Monday may raise the percentage and still leave more cash than an empty dining room would. A discount on a busy night that would have been full anyway gives away cash for nothing.

Work out the promotion's effect in cash before running it: the expected guests, the gross profit per guest at the promotional price, and the gross profit you would have made otherwise.

The same logic changes how specials are judged. Take an invented week in which the kitchen runs a special of whole grilled fish. It costs 9.00 to make and sells at 24.00 before tax: a food cost of 37.5 per cent, well above the menu's usual figure. By percentage, the special looks like a mistake, and a chef judged on percentage would be tempted to stop it.

Now look at what it replaced. Guests who ordered the special would otherwise have chosen mostly from two regular mains, a chicken dish leaving 10.50 and a risotto leaving 11.00. The special leaves 15.00 on every plate. If it sold 60 portions in the week, it added roughly 250 of gross profit compared with the dishes it displaced, while pushing the week's food cost percentage up by a fraction of a point.

The week's report would have shown a worse percentage and the business would have been better off. That is exactly the situation in which a team judged only on the percentage makes the wrong call, and it is common: specials are often built around better ingredients, at higher prices, precisely because guests will pay for them.

Chefs are trained on food cost percentage, and many are judged by it. Switching the conversation to cash needs explaining, or it will look like a way of excusing waste.

Keep both numbers in front of the team and be clear about what each is for. The percentage, actual against theoretical, is how the kitchen's control is measured: waste, portions and yields. Gross profit per dish and per guest is how the menu is judged: what to cook, promote and price. A chef who runs a tight kitchen and cooks a menu that leaves good cash per guest is doing both jobs well, even in a week when the percentage rises because a profitable special sold strongly.

When you ask the kitchen for a new dish, ask for a cash margin as well as a percentage. Chefs who know the target is cash will often propose dishes that are better for guests and for the business than the cheap, low-percentage fillers a percentage target encourages.

Drinks show the same pattern clearly. A gin and tonic might have a pour cost of 14 per cent and leave 27.78 in the example from our guide to pour cost, while a premium whisky at 35 per cent leaves 55.71 a serve. The whisky has the worse percentage and the better cash. A bar that steers guests away from premium spirits to improve its pour cost is making the same mistake as the kitchen in the example above.

Cash per plate is not the whole story either. Some dishes take much longer to prepare or cook, and on a busy night the kitchen's time is limited. A dish that leaves a large gross profit but ties up a cook for twenty minutes during service may earn less per hour of kitchen time than a simpler dish.

This matters mainly at capacity. On a quiet night, kitchen time is not scarce and cash per plate is the right measure. On a full night, it is worth knowing which dishes slow the pass, and whether their margin justifies it. A rough note against each dish, simple, moderate or complex, is enough to keep the question in view when reviewing the menu.

The calculation is quick once the inputs exist.

A spreadsheet with one row per dish does all of it. Keep the food cost percentage in a column beside the gross profit, so both are visible.

Once a month, look at the menu with both numbers side by side.

Decide one or two changes, make them, and look at the effect the next month. Small, measured changes beat a full redesign every season.

Many venues set a target food cost percentage and nothing else. Add a cash target: a gross profit per guest that covers labour, overheads and the profit you need, given the number of guests you expect. Work it out from the business's costs rather than from a rule of thumb.

The percentage target stays useful for controlling the kitchen. The cash target keeps the menu honest. When the two pull in different directions, the cash target is the one that pays the bills. Our guide to calculating food cost percentage covers the first, and our guide to gross profit on a dish covers the second.

Gross profit per dish needs each dish's cost, its price and how many were sold. servearound holds the price and the sales; the cost stays in your own costing sheet today.

The menu report in Analytics shows units sold, revenue and share of sales for every dish and category over any range of dates, which is the popularity half of menu engineering and the units you multiply each dish's gross profit by. Prices are set once in menus and show on the till and on every guest menu at the same time.

servearound does not hold dish costs today, so gross profit per dish is worked out in your own sheet from the menu report's units and revenue. If you would like to see the sales side, get in touch.

It is a dish's price before tax minus its plate cost: the cash each plate leaves after its ingredients. It is what pays for labour, rent and everything else.

Yes, for controlling costs: spotting dishes whose costs or portions have drifted, and comparing actual with theoretical cost. Use gross profit per dish to decide what to sell and promote.

Yes. If the menu mix moves towards cheaper dishes with lower percentages but less cash per plate, the percentage improves while total gross profit falls, as the worked example shows.

In a restaurant they are close. Contribution margin is the general term for the cash each sale contributes after its variable costs. For a dish, the main variable cost is its food, so gross profit per dish is a working version of it.

No. Premium dishes usually carry a higher percentage and still leave more cash. Price them by the cash they leave and what guests will pay, not by the menu's average percentage.

Use gross profit per guest: total gross profit for a period divided by the number of guests. Track it weekly alongside the food cost percentage.

The ones that leave a high gross profit per dish and that guests are happy to order, especially those that are not yet as popular as they could be. Better placement, a better description and a server's recommendation move them more than a lower price does.

No. Cheap dishes bring in guests who would not order the expensive ones, and a menu needs entry points. Judge each by the cash it leaves for the space and time it takes, and keep the ones that earn their place.

A discount always raises the food cost percentage. Whether it helps depends on whether it brings in enough extra guests or spend to leave more cash than the period would have earned without it.

Food cost percentage is a ratio; gross profit per dish is cash, and cash pays the bills. In the worked example, pushing guests from a steak that leaves 19.00 to a pasta that leaves 12.00 improved the percentage by over three points and cut the evening's gross profit by 9 per cent.

Keep the percentage for what it does well: catching drift, controlling the kitchen and flagging dishes that may be under-priced. Use gross profit per dish, weighted by the menu mix, to decide what to sell, promote and remove, and track gross profit per guest weekly. When the two numbers disagree, believe the cash.