Pricing & margin
Cost-Plus Pricing
Formula reviewed by Tahir Asif, CMA
Setting a price by adding a margin or markup to the cost of producing the item.
In cost-plus pricing, the price is built from cost. In a restaurant the most common form divides the recipe cost by a target food cost percentage, so a $4.60 plate at a 30% target is priced at $15.33. Variants add a fixed contribution margin, include direct labor for a prime cost target, or add overhead and a profit margin.
Cost-plus pricing sets a floor and keeps margins consistent, but it ignores what guests will pay and how competitors price, so it is usually checked against the market and the menu mix before a price is set.
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