Contribution margin
Also called: gross profit per dish
Contribution margin is menu price minus plate cost — the dollars a dish leaves behind to cover rent, labor and profit. It's measured in dollars, not percent, which is why it answers the question food cost percentage cannot: how much money does this dish actually make.
Formula
Contribution margin = Menu price − Plate cost
Total contribution = contribution margin × units sold. That second number is what actually pays the rent.
Worked example · Two dishes, one week
- Margherita pizza — price $16.00, cost $3.20
- CM $12.80
- Sold, 210 units
- $2,688
- Ribeye — price $44.00, cost $17.60
- CM $26.40
- Sold, 38 units
- $1,003
- Weekly contribution
- Pizza wins by $1,685
The pizza runs a 20% food cost, the ribeye 40%. By percentage the ribeye looks twice as bad. By dollars the pizza carries the restaurant — and cutting the ribeye would still cost you a thousand dollars a week.
Why percentages mislead on menu decisions
You cannot deposit a percentage. A 20% food cost on a $6 side is $4.80 of contribution; a 40% food cost on a $44 steak is $26.40. Chasing the lowest percentage systematically pushes a menu toward cheap, low-value items and away from the dishes that carry the overhead.
The practical version: use food cost percentage to spot dishes that have drifted from where you priced them, and use contribution margin to decide what to promote, reposition, or cut. Menu engineering is the formal version of exactly that pairing.
Contribution margin and price increases
Because contribution is dollars, a price increase drops through to it almost entirely — plate cost doesn't move when you change a price.
| Before | After | |
|---|---|---|
| Menu price | $15.00 | $16.00 |
| Plate cost | $4.20 | $4.20 |
| Contribution margin | $10.80 | $11.80 |
| Weekly contribution | $1,620 | $1,770 |
| Annual difference | +$7,800 |
That is the whole argument for repricing on a schedule instead of when it gets scary. See how to raise menu prices.
Run the numbers
Profit margin calculator
The guide that works it through
Contribution Margin Beats Food Cost Percentage
Why food cost percentage systematically points at the wrong dish, with worked examples showing how percentage-chasing costs a restaurant real money.
Related terms
Food cost percentage
The share of a dish's menu price consumed by the ingredients on the plate.
Menu engineering
Sorting every dish by popularity and contribution margin to decide what to promote, reprice, rework, or cut.
Plate cost
The total ingredient cost of one served portion, garnish and sides included.
Menu mix (PMIX)
The share of total sales each menu item represents — the weights behind every menu-level average.
Gross margin vs. markup
Margin is profit as a share of price; markup is profit as a share of cost. Confusing them underprices a menu by several points.