When it comes to running a restaurant, costing out a dish might seem straightforward: add up the price of the ingredients, mark it up, and you’re good to go. But the real cost of every dish you serve is much deeper — and if you’re only looking at ingredient costs, you’re likely missing the bigger picture.
At MRGN, we work with restaurants every day to help them understand the full scope of what goes into their menu prices, beyond just the grocery list. Whether you’re a seasoned restaurateur or just starting out, understanding the true cost of every dish could be the difference between thriving and barely surviving.
Let’s dig into why ingredient cost is just the tip of the iceberg — and what you should be looking at instead.
Ingredients Are Only the Beginning
Yes, ingredients are the obvious cost, and they’re a critical piece of the puzzle. But focusing only on ingredients leads many restaurants to underprice their dishes.
For example, take a simple pasta dish. You tally up the noodles, sauce, cheese — maybe $4 worth of ingredients. You price it at $12, thinking you’ve covered yourself. But have you really?
Here’s what’s missing from that calculation:
- Labor: Who is prepping and cooking that dish? Are they a line cook, sous chef, or head chef? Their hourly wage (plus taxes and benefits) needs to be factored in.
- Utilities: That dish didn’t cook itself. You used gas, electricity, and water to bring it to life.
- Overhead: Rent, insurance, licenses, equipment maintenance — all part of the cost of doing business.
- Waste and spoilage: Not every ingredient makes it to the plate. Prep waste, spoilage, and human error all chip away at margins.
- Packaging (if takeout): With the rise of delivery and takeout, packaging costs are no joke — and they need to be included.
If you’re only accounting for ingredients, you’re leaving out 50% (or more) of what that dish really costs you.
Labor: The Invisible Cost in Every Bite
One of the biggest hidden costs in every dish is labor. Yet so many restaurants overlook it when pricing their menu.
Think about how many hands touch that plate:
- Prep cook chopping veggies in the morning
- Line cook sautéing and plating
- Dishwasher cleaning up
- Server delivering it to the customer
Labor costs don’t just include wages — there’s also payroll taxes, healthcare, sick leave, and other benefits.
MRGN’s restaurant cost management platform helps break down labor costs per dish, so you can see exactly how much of that $12 pasta plate is paying for the team that makes and serves it.
Pro Tip: Use software (like MRGN!) that tracks labor in real time, so when overtime or unexpected absences happen, you can adjust pricing or shift strategy.
Overhead: The Silent Expense Eating Your Profits
Imagine your rent is $8,000 a month. You sell 2,000 dishes a month. Without even factoring in ingredients or labor, $4 of every dish is going straight to rent.
And rent isn’t your only overhead:
- Utilities: Lights, gas, heat, internet
- Insurance: Liability, worker’s comp
- Licenses and permits
- Marketing: Social media ads, photoshoots, delivery app fees
- Equipment maintenance: Ovens break. Refrigerators need repairs.
Every dish needs to “carry its share” of these costs — or you’re eating the difference.
With MRGN, you can calculate your total monthly overhead and divide it intelligently across your menu, so you know exactly how much overhead is baked into every plate you serve.
Waste, Spoilage, and Shrinkage: The Hidden Monsters
You buy a case of lettuce for $20. You use half before it wilts. Suddenly, your cost of lettuce just doubled for every dish it touches.
Waste happens in every kitchen:
- Over-prepping ingredients
- Mistakes (burnt food, wrong orders)
- Spoilage (expired dairy, wilting greens)
If you’re not tracking your waste, you’re underestimating your food costs — and overestimating profits.
MRGN lets you log waste easily, turning what was once a frustrating, handwritten chore into a data point that helps you refine your ordering and prep habits.
Pro Tip: Track which dishes cause the most waste — maybe it’s time to adjust portions or rework the recipe.
Takeout and Delivery: The New Cost Frontier
Takeout and delivery are no longer an “extra” — for many restaurants, they’re a lifeline. But they come with new costs that eat away at profits:
- Packaging: Containers, napkins, bags, cutlery
- Delivery app fees: Uber Eats, DoorDash, and others can take up to 30% of your sale
- Customer service costs: Dealing with refunds, remakes for incorrect orders
If you’re pricing your dine-in menu without adjusting for takeout costs, you’re losing money on every to-go order.
MRGN lets you model costs separately for takeout vs dine-in, so you can make smart pricing decisions — like charging more for delivery, or offering takeout-only combos.
The Emotional Cost: When Margins Shrink, So Does Morale
Running a restaurant isn’t just about numbers. It’s your dream, your passion, and your livelihood.
When margins shrink, it’s stressful:
- You worry about making payroll.
- You worry about keeping the lights on.
- You worry about disappointing customers if you need to raise prices.
MRGN exists to take the guesswork out of those worries. When you truly understand the cost of every dish, you can:
- Price confidently, knowing you’re covering costs and protecting profits.
- Plan smarter — knowing when to hire, when to cut back, and when to invest in new menu items.
- Stay in control — so your restaurant runs you, not the other way around.
How MRGN Makes Costing Easy
At MRGN, we believe restaurants shouldn’t need an accounting degree to make smart financial decisions.
Here’s how MRGN helps you get a true picture of dish costs:
- Ingredient-level costing: Track exact costs for each menu item, automatically updated as prices change.
- Labor tracking: Connect schedules and payroll to know exactly how much labor goes into each dish.
- Overhead allocation: Break down rent, utilities, and other fixed costs across your menu.
- Waste tracking: Easily log and analyze waste to cut unnecessary losses.
- Profit modeling: See real-time profit margins per dish — before you ever serve it.
No spreadsheets, no guesswork — just clear insights that help you run smarter.
Why Pricing Right is an Act of Survival (and Self-Respect)
In today’s market, where ingredient prices are volatile, labor costs are rising, and customers expect both quality and value, pricing your dishes right is non-negotiable.
Underpricing hurts more than your bottom line. It means:
- You can’t pay your team fairly.
- You can’t invest in better ingredients.
- You’re constantly stressed and burning out.
But when you know your real costs and price accordingly:
- You can pay your staff well and retain great people.
- You can create dishes you’re proud of without cutting corners.
- You can focus on hospitality, not survival.
Know Your Costs, Protect Your Passion
Running a restaurant is one of the hardest jobs out there. You pour your heart into every dish — shouldn’t you make sure that dish is supporting you, too?
At MRGN, we’re here to help restaurants like yours succeed — not just survive. Knowing the true cost of every dish is step one to building a business that lasts.
Ready to stop guessing and start growing?
Book a free demo of MRGN today — and let’s make sure every dish you serve is profitable, sustainable, and worth every ounce of effort.
