How Much Do Restaurants Markup Food
Find out how much restaurants markup food, and why.
Author: Chef George Krumov
Going out for dinner is not only about food or prices. It is more often about seeing and being seen. Being served and not having to clean afterwords doesn't hurt either.
However, sometimes you can't help but ask yourself, are the prices fair and is the meal worth what you are paying. There isn't a universal answer to this question. Like with most things in the capitalist economy, restaurant food is worth as much as you can sell it for.
Most restaurants try to limit their food cost to about 30-35 percent. That doesn't mean that they make 65-70% profit, though. There are a lot more things to pay for, until a restaurant cuts any profit for the owner.
The way food markup works is multiplying by three the amount of all the food used in one menu item. For example, lets take steak dinner. Steak dinner uses 1 steak, some potato, some vegetables for side, steak sauce, seasoning, herbs and spices, may be a little butter. A lot of restaurants serve bread and butter, and even a free salad with each meal. If all of the food cost to the restaurant 7 dollars, usually the menu item will be priced at $21.
I think that this is a fair price, provided that restaurants have a lot more expenses that have to be paid. Of course, with tax and tip you will end up paying more than 3 times the food cost, but you can be glad that you are supporting a vital part of the economy. We all know someone who is employed in the restaurant industry. Maybe you were employed at one time, perhaps when you were finishing college.
Three times markup is a fair price to pay for a meal, considering how many people are involved in each meal, from the moment food is delivered to the restaurant, stored, prepped, cooked, served, dishes are washed and the floor is cleaned at the end of the night. Nowadays, here where I live, most restaurants markup even higher to compensate for increase in minimum wages and increase in utility bills. So, even 4 times markup would be fair.
Cheers and good luck.