Contribution margin
Example: A bistro notices its $10 appetizer at 30% food cost contributes $7 a plate, while its $30 entree at 40% food cost contributes $18, so even with the 'worse' cost percentage the entree pays far more rent per sale.
what one sale of an item adds to covering fixed costs and profit
For a single menu item: sale price minus the variable cost of producing one unit (plated food cost). Reported in dollars (CM \$) and as a percent of price (CM %). Distinct from operating margin and from food-cost percentage.
Why it matters
Most operators optimise on food-cost percent, but the dollar figure is what actually pays rent. A 30%-food-cost \$10 appetiser earns \$7 per sale; a 40%-food-cost \$30 entrée earns \$18 — the “worse-cost” entrée nearly triples the contribution. Menu engineering plots CM \$, not CM %. The Plate Cost Calculator suggests three menu prices at 28% / 30% / 33% and reports the dollar contribution margin at each.
Frequently asked
What is contribution margin?
Contribution margin is for a single menu item: sale price minus the variable cost of producing one unit (plated food cost). Reported in dollars (CM $) and as a percent of price (CM %). Distinct from operating margin and from food-cost percentage.
Why does contribution margin matter for a restaurant?
Most operators optimise on food-cost percent, but the dollar figure is what actually pays rent. A 30%-food-cost $10 appetiser earns $7 per sale; a 40%-food-cost $30 entrée earns $18 — the “worse-cost” entrée nearly triples the contribution. Menu engineering plots CM $, not CM %. The Plate Cost Calculator suggests three menu prices at 28% / 30% / 33% and reports the dollar contribution margin at each.
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