Restaurant Profitability Blog

5 Reasons Recipe Costing Dooms You to Fail

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Recipe costing… it’s a little like a Tinder date.

Sure, she looks great in the photo. But when she shows up to the restaurant… well, let’s just say she’s not what you expected.

How does getting catfished by your online date relate to recipe costing?

You think calculating the price of each dish is going to get you a big, beautiful profits statement that will be the magic formula for running your restaurant.

But what you get is the opposite…

A monster of time-eating tasks, irritating minutiae and useless numbers.

The truth is, if you’re allowing yourself to get wrapped up in thinking recipe costing will drive profitability and operational efficiency… you might actually be dooming yourself to failure.

In fact, here are 5 compelling reasons why savvy restaurant owners are keeping recipe costing off their plates.

#1 It Doesn’t Improve Your Bottom Line

Fans of recipe costing say that performing this task on the regular is the only way to really make sure your food costs remain where they should be – between 28% and 32%.

So if a dish costs $2 in ingredients, you’d better be selling it for at least $6.25.

On the surface, this argument seems to hold water when it comes to pricing out your menu.

But it just isn’t practical for understanding profits.

For recipe costing to have any impact on your bottom line, you’d have to make sure you’re serving identical portions. A simple over-serving or off-the-menu order… and the whole process breaks.

And let’s face it… that happens every day.

And to make the prices accurate, you’d need to update your distributor pricing pretty much weekly. Supplier pricing can sometimes even fluctuate on a daily basis.

So that recipe costing exercise you did last summer? Well, it certainly isn’t a true reflection of the cost of that dish.

Recipe costing just isn’t sustainable.

Which means you won’t see any real dollars-and-cents benefits from banking on it to manage your food spend.

You want your restaurant to flourish, not flounder.

To make this happen, you need to focus on making practical improvements to your bottom line…

Not ones that don’t make a difference.

#2 You Get Lost in Useless Details

If you dedicate too much energy to counting the olives on each plate or leveling your tablespoons of parsley, you run the risk of missing the forest for the trees.

When you look at recipe costing figures too regularly, it’s easy to become hyper-sensitive to changes.

Is it really worth the time, energy and frustration to investigate why it’s costing $2.78 to make a dish that used to cost $2.76?

No. Don’t be penny wise and pound foolish.

You and your managers have a business to run.

And if there’s no guarantee your profits will be positively impacted by your analysis paralysis… it’s not worth your attention.

Wouldn’t you rather save hundreds of dollars a month rather than a handful of pennies?

Uh… duh.

Don’t pour all your effort into focusing on teaspoons of oregano and pinches of salt. Keep your attention where it needs to be…

On the big picture. 

#3 You’re Not a Robot

In a perfect world, you’d want every dish to come out of the kitchen looking and tasting exactly the same.

In the real world, that’s not going to happen.

People aren’t robots… there’s natural variation from plate to plate.

Sometimes an extra radish gets tossed into the salad or another scoop of French fries gets thrown onto the plate.

For recipe costing to do you any good, your staff would have to be robots… no pinch of this or dash of that. Any excess or shortage of ingredients will make all the work you put into recipe costing useless.

And then there are other exact numbers you need for recipe costing… prep minutes, cook minutes, finish minutes.

They all need to be accounted for with every menu item in every menu category.

And let’s be honest… you usually guestimate them.

The reality is if you’re not going to be robotically precise… recipe costing won’t do anything for you.

It will actually be a waste of time.

#4 You Waste Time Updating Your Software or Spreadsheet

You’ve already got a lot on your plate.

You definitely don’t have extra time lying around.

And if you did… you wouldn’t want to spend it on updating your recipe costing software.

But that’s probably exactly what you’re doing.

If the recipe costing software you choose is worth its weight in parsley, it requires you to manually update it every time your menu changes.

There’s nothing automagical about it.

What if you decide to change your marinara recipe? That’s right… you’ll need to updated it in your recipe costing software.

Each tweak of your menu means an increase or decrease in per-serving cost.

Let’s not even talk about how much work it is to add 4 new seasonal dishes… between the entrees, sides and garnishes, you’ll be up to your elbows in data entry working to get all that new info into the system.

And what happens when a critical piece of equipment in the system breaks… say the scale that plugs into your computer, for example?

Now you’ve got to expend energy fixing equipment or arranging a replacement.

And even the tried-and-true spreadsheet option is a no-go.

While you may not waste as much time with setup and updates, keeping a spreadsheet current and accurate – no matter how awesome the recipe costing template – certainly isn’t easy.

By adding a spreadsheet to the mix, you allow human error to impact reliability.

All this updating, learning, and re-learning takes real time.

And time is money.

#5 You Can Take Inventory to Be a Lot More Effective

Some things are optional at your restaurant…

Spot-free wine glasses.

Fresh flower arrangements.

An attention-grabbing chalkboard menu.

But some things aren’t optional… like taking inventory.

In fact, restaurants that take inventory save 24% more money a month than those that don’t.

Why’s this?

Because inventory gives you all of those things that recipe costing shortchanges you on.

By taking inventory, you can easily figure your Cost of Goods Sold… or if you use a handy inventory guide.

This will show you when you’ve over-ordered, identify instances of food waste, and help catch employee theft.

Most importantly, it will help you make sure your food costs are in line with your budget.

Monitoring your inventory improves your bottom line.

You’ll save thousands of dollars… you might otherwise be throwing in the trash.

Don’t Get Catfished By Recipe Costing

It’s a tough time to be a restaurateur.

Food and labor costs are going up.

And sales are going down.

Despite these worrisome stats, there’s still lots of money to be made in the restaurant industry.

But it’s not going to be made by focusing on recipe costing.

Sure, recipe costing is a must for pricing your menu. But relying on it to manage the profits of your business?

It’s a fool’s errand. Ultimately, it won’t improve your bottom line. It might even cause you to lose sight of the big picture and forget to dedicate attention to what’s really important.

Instead, spend time maintaining a meaningful and accurate inventory on a consistent basis.

This will help you understand your Cost of Goods Sold, usage by day, days on hand and other important numbers that help you manage your profits & losses.

By focusing on inventory… you’ll never be catfished by recipe costing again.


Looking for an alternative to recipe costing software or those outdated spreadsheets? We’ve got you covered. The Orderly App is the easy-to-use app for inventory.

Take a count right from the palm of your hand. We’ll even send you price updates while you sleep.

Best part is… it’s free.

Orderly5 Reasons Recipe Costing Dooms You to Fail

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