Done well, costing is a ten-minute weekly rhythm, not a one-off spreadsheet built the night before opening. Once your overheads, suppliers, and labour minutes are set up in one place, every menu change runs through the model automatically. The maths is straightforward; what matters is running it against your real numbers, not generic ones.
The 25 to 35 percent food cost target you will read on every hospitality blog is a sensible starting point, but it is built on industry averages. Your rent, your suburb, your menu mix all shift the number.
Cost from the supplier invoice, not the supermarket shelf
Wholesale prices and supermarket prices are different numbers, and the gap matters more than first-time founders realise. A litre of full-cream milk at Coles is around $1.50. The same litre delivered by a hospitality supplier in commercial volumes sits closer to $1.80 to $2.20 once delivery is loaded in. Build your costing off the wholesale invoice you will be paying.
Cost the yielded weight, not the purchased weight
One kilogram of avocado in the box does not give you one kilogram of plated avocado. Trim, browning, and seed loss take roughly 25 to 35 percent off. Cost the yield. The same applies to meat (cooking loss matters), leafy greens (trim loss), and anything fresh that gets prepped before plating.
Australian wholesale prices move constantly. Eggs jumped 35 percent in 2024 and oil doubled in some grades. Building a weekly re-cost rhythm catches these shifts early, more on that in Step 06.
Allocate every overhead to a per-dish number
Ingredient cost is a fraction of the true cost of a dish. The rest is rent, wages, electricity, gas, water, packaging, insurance, accounting, software, EFTPOS fees, waste collection, and depreciation on the equipment that produced it. Every dish has to carry its share before any margin exists.
The maths is straightforward. Add your monthly overheads. Divide by realistic monthly transactions. That is the overhead each transaction must carry.
| Rent | $8,500 |
| Wages (incl. super, on-costs) | $12,000 |
| Power, gas, water | $1,400 |
| Packaging, EFTPOS, accounting | $1,800 |
| Software, insurance, waste | $1,300 |
| Monthly overheads | $25,000 |
| Realistic monthly transactions | 8,000 |
| Overhead per transaction | $3.13 |
That flat white with 35 cents of milk and beans? That is the ingredient cost. Once overhead is loaded in, the dish needs to clear about $3.48 just to cover its share of running the cafe, before any margin lands in your pocket. Knowing that number changes how you price the cup.
True cost: ingredients, overheads, and labour combined
Labour is its own line on the cost sheet, separate from your overhead allocation. A poached egg breakfast that takes four minutes of cook time at $32 an hour loaded carries roughly $2.13 of labour cost, just for the cook minutes. Front-of-house labour is already in your overhead bucket; back-of-house cook time is tied to the dish.
So a poached egg breakfast looks like this:
| Ingredients (yielded) | $2.40 |
| Overhead allocation | $3.13 |
| Cook labour (4 min @ $32/hr loaded) | $2.13 |
| True cost per dish | $7.66 |
Costed on ingredients alone, the dish looks like a 73 percent margin winner at $9. Run the true cost, with overheads and labour included, and the real margin sits closer to 15 percent. That gap is what proper costing closes, and it is the difference between a menu that pays the rent and one that just covers itself.
Set your food cost target against your overheads
The 25 to 35 percent food cost rule is a useful starting point, and Australian cafes typically land somewhere inside it. The exact number that works for your cafe depends on your overheads. A main-street cafe paying premium rent runs a tighter food cost than a back-street cafe with lower fixed costs, same industry, different maths.
This is where generic targets stop being precise. Your real numbers, the ones from Step 02, tell you what your target should be, dish by dish.
HospoSure loads your overheads in once: rent, wages, utilities, packaging, the lot. It then costs every dish on your menu against your actual numbers, not an industry benchmark. Supplier prices update live. The full costed menu pushes into Square POS in one click.
Start building your menuWork the price backwards from the GP% you need
Once true cost is known, pricing is mechanical. Pick the gross profit percentage your dish category needs to hit. For coffee, that is usually 70 to 75 percent. For food, 65 to 70 percent. For batched cold drinks, 75 to 80 percent. Take your true cost, divide by (1 minus GP%), and you have your sell price.
| True cost | $7.66 |
| Target GP% | 65% |
| Calculation | $7.66 ÷ 0.35 |
| Sell price | $21.90 |
If the calculated price feels too high for your suburb, the formula is doing its job. It is pointing to something upstream worth adjusting. Maybe the labour load on the dish, maybe the overhead allocation, maybe the menu mix. Pricing reveals the lever; you choose which one to pull.
Competitor prices are tempting to copy, but their overheads are not yours, their suppliers are not yours, and their wage bill is not yours. Use them as a sense-check, not a source of truth.
Re-cost weekly, not yearly
Australian wholesale food prices move continuously. Coffee, oil, dairy, seasonal produce all shift week to week. A menu that was profitable in autumn can drift below margin by spring without a single line on it changing, which is why re-costing is one of the highest-return ten minutes a cafe owner spends in a week.
The cafes that thrive past year one build re-costing into a weekly rhythm. Once your system is set up properly, ten minutes on a Sunday is enough. High-volatility ingredients (eggs, dairy, oil, seasonal produce) checked weekly, the rest monthly. Small investment, substantial protection on margin.
What a properly costed cafe menu looks like
A menu has been properly costed when:
- Every ingredient is priced from real supplier invoices, including yield and trim loss.
- Real monthly overheads are allocated to a per-transaction number.
- Cook labour minutes are loaded into the cost of each dish.
- True cost equals ingredients plus overheads plus labour, calculated dish by dish.
- The food cost target reflects your overheads, not the industry average.
- Prices are worked backwards from required GP%, not copied from competitors.
- Costing updates whenever supplier prices move, weekly not yearly.
Get all seven right and the menu does what it is supposed to do: pay the rent, pay the staff, and pay you.