Written for owners of restaurants, cafes and coffee shops, bars, takeout and delivery kitchens, food trucks and bakeries with seating in the US, with state detail for California, Texas, New York and Florida.
The short version
- Divide plate cost by your target food cost.That gives the menu price before sales tax. For example, a $5.40 plate at a 30% target sells at $18.
- Rank every dish by dollars left per plate.What is left after plate cost pays labor, overhead and profit. A higher food cost dish can still leave more. Then check how many sell.
- Show any fee clearly or build it in.In California and Florida, a separate mandatory fee must appear on menus with its purpose. If you cannot show it everywhere, build it into prices.
Menu prices in the US are usually shown before sales tax, so the number on the menu is what you have to cover your costs with. Price from what the plate costs you, check the whole operation with prime cost, and know how many covers a month you need before you make money.
The numbers that matter
- Food cost %: food cost of goods sold divided by food sales. Cost of goods sold is opening inventory plus purchases minus closing inventory. Beverage cost % works the same way on beverage sales.
- Net sales: after comps and discounts, before sales tax, excluding tips and any service charges paid out to staff.
- Prime cost %: total cost of goods sold plus total labor cost, divided by net sales. Labor includes payroll taxes, workers' comp, benefits and any service charge paid as wages.
- Breakeven covers: fixed costs divided by the contribution each cover leaves, which is the check average times one minus your variable cost percentage.
| Plate cost | $5.40 |
| Contribution toward labor, overhead and profit | $12.60 |
| Menu price before sales tax | $18 |
$5.40 / 0.30 = $18.00. Cross-check: $18.00 x 30% = $5.40. As of Oct 2026.
You pay rent and payroll with dollars, not percentages. A dish with a higher food cost can still leave more dollars on every plate.
| Cost of goods | $18,600 |
| Labor, fully loaded | $19,800 |
| Left for occupancy, other costs and profit | $21,600 |
| Net sales | $60,000 |
Prime cost is 64.0% and food and beverage cost 31.0%, leaving 36.0% for everything else. As of Oct 2026.
| Check average | $42 |
| Less variable costs at 38% | -$15.96 |
| Contribution per cover | $26.04 |
With $45,000 of monthly fixed costs, breakeven is $45,000 / $26.04 = 1,729 covers a month (1,728.1 rounded up). As of Oct 2026.
If you add a fee instead of raising prices
A mandatory service charge is the restaurant's revenue, not a tip (29 CFR 531.55). The FTC polices hidden and misleading fees under FTC Act section 5; its 2025 fee rule covers live-event tickets and short-term lodging only, so restaurants answer to section 5 and state law.
California
The advertised or listed price must include every mandatory fee other than government taxes. Restaurants and bars may instead show a mandatory fee or service charge separately if it is clearly and conspicuously displayed, with its purpose, on menus, ads and other price displays. As of Oct 2026.
Cal. Civ. Code 1770(a)(29) (SB 478); SB 1524
Florida
From July 1, 2026, a public food service establishment that imposes an operations charge, meaning an automatic required fee other than a government tax, must disclose the amount or percentage and its purpose on each applicable menu, written contract and ordering website or app. Bills and receipts have separate disclosure requirements. As of Oct 2026.
Fla. Stat. 509.214
- Card surcharges: allowed federally within card network rules (a posted notice, a cap, and never on debit cards), banned in Connecticut and Massachusetts, and in New York the posted price must show the total credit price and the surcharge may not exceed the processing cost (Gen. Bus. Law 518). As of Oct 2026.
- For example, a 4% card surcharge in Manhattan against a 2.9% processing cost has 1.1 points that must go.
In California, a fee printed only at the foot of the check, and not on the menu, creates exposure under SB 478 and SB 1524. If you cannot show a fee clearly, with its purpose, everywhere you show prices, build it into the menu price: a class action costs more than the fee raises.
Asked in Greymill
Steak: $32 x 38% = $12.16 food cost, so $19.84 left
Pasta: $18 x 22% = $3.96 food cost, so $14.04 left
What is left is the contribution: the dollars that pay labor, overhead and profit.
Rent and payroll get paid in dollars, not percentages. So the steak earns more for every table you turn.
Before you cut anything: weigh those dollars against how many of each you sell.
Next step: once the menu is set, I can work out how many covers a month you need to break even.
Ask it about your own business
Paste this into Greymill with your own figures, and Data & Analytics works it through for your business.
I run a restaurant, cafe or bar in [state], in the US. Here are my top dishes with plate costs, menu prices and how many of each we sold last month: [list]. My target food cost is [target], weekly net sales are about [amount], cost of goods [amount] and labor [amount], and monthly fixed costs are [amount]. We [do or do not] add a service charge or card surcharge of [rate], shown on [menu, check, website]. Build a menu costing sheet with food cost and contribution per plate, show my prime cost and breakeven covers, tell me which items to reprice, and check how any fee is shown against my state's rules.
More for restaurants, cafes and bars in the US
- Keeping cash flowing when sales tax, payroll tax and gift cards are not really yoursCard money arrives daily, but part of it belongs to the state, the IRS or a gift card holder, and a 13-week model keeps it apart and shows an expensive advance for what it is.Read the lesson
- Claiming the FICA tip credit and taxing service charges correctlyYou pay payroll tax on your servers' tips and can claim most of it back through the 45B credit, while a mandatory service charge changes both your sales tax and your payroll.Read the lesson
- Opening, buying or keeping a liquor license, and staying clear of dram shop claimsThe permits around a liquor license, how a transfer works when you buy a licensed business, and what server training and your state's dram shop law mean for your risk.Read the lesson
- Buying a restaurant or signing a lease without inheriting someone else's debtsThe lease, vendor and purchase terms that sink restaurants, and the notices that stop a buyer inheriting the seller's unpaid sales tax.Read the lesson
- Paying servers right: tip credits, tip pools and service charges in your stateYour state, and sometimes your city, decides the tipped wage, who can share the pool and how a service charge is paid, and mistakes come back with liquidated damages.Read the lesson
- Winning direct orders and better reviews without overpaying the delivery appsGrow the channels you control, check what each platform really costs you, and ask for reviews in a way the FTC allows.Read the lesson
- A failed inspection, an allergic reaction or an incident after drinks: the first 24 hoursWhat to fix, keep and say, and who to call, when an inspector, an allergic guest, an injured third party or a demand letter puts the business at risk.Read the lesson
Open the interactive lesson · Every restaurants, cafes and bars lesson · What Greymill knows about the trade
Sources
The primary sources behind this lesson, checked Oct 2026.
- FOMC statement of September 16, 2026; 2026 meeting calendar (Pricing, prime cost and market data)
- October 28, 2026 statement; FOMC calendar 2026 (federalreserve.gov/monetarypolicy/fomccalendars.htm) (Pricing, prime cost and market data)
- 16 CFR Part 464 (Surcharges, service charges and price display)
- Fla. Stat. 509.214(1)(b), (2) to (4) (Surcharges, service charges and price display)
- Gen. Bus. Law 518 (2024 amendment) (Surcharges, service charges and price display)
- 12 CFR 1005.20; 15 U.S.C. 1693l-1 (Surcharges, service charges and price display)
- 16 CFR 465.2 and 465.4 (Surcharges, service charges and price display)
- 15 U.S.C. 45b (Surcharges, service charges and price display)
- California 2026 minimum-wage FAQ (State wages, service charges and overtime)
- Labor Code 1474 to 1476 (State wages, service charges and overtime)
- 12 NYCRR 146-1.2, 146-1.3 (State wages, service charges and overtime)
- Lab. Code 62.051, 62.052 (State wages, service charges and overtime)
- minimum wage (State wages, service charges and overtime)
- Michigan 2026 minimum-wage schedule (State wages, service charges and overtime)
- 2026 calendar (Read the owner and answer at their level)