Update: From 1 July 2026, GOSI rates for Saudi employees under the new system rose to 12.75% for the employer (Mercans). If your team includes these employees, your labor cost per dish has changed. Recost your menu now.
In this guide
What is recipe costing and why does it matter in Saudi Arabia?
Why most dish costs in Saudi kitchens are wrong
The four layers of a dish's True Cost
How to cost a dish in 7 steps (with a worked example)
Spreadsheet vs food costing software
Your recipe costing checklist
Frequently asked questions
Recipe costing is the process of finding out exactly what one portion of a dish costs you to make. To cost a dish correctly in Saudi Arabia, you add four costs: Ingredients (with wastage), Labor, Packaging and Overhead. Then you compare that total with your selling price after removing 15% VAT.
Most owners only count ingredients. That number looks healthy, but it hides the real margin. This guide shows you the full method, step by step, with a worked example in SAR.
What is recipe costing and why does it matter in Saudi Arabia?
Recipe costing turns a recipe into a number. You list every ingredient, its quantity and its price. Then you add the other costs that each portion carries.
The Saudi market makes this more urgent. The food services market is estimated at around USD 30 billion, and cafés are the fastest-growing segment . More competition means less room for pricing mistakes.
Costs also move quickly. One industry report estimates that Saudi Arabia imports about 70% of its food, so freight and global prices affect your ingredient costs (Ken Research).
Why most dish costs in Saudi kitchens are wrong
In our experience working with F&B owners, four mistakes appear again and again:
Ingredients only. Labor, packaging and overhead are left out.
No wastage. Trimming, spillage and evaporation are ignored.
VAT inside the price. Owners divide cost by the menu price, but that price includes 15% VAT. The VAT belongs to ZATCA, not to you.
Old prices. The recipe was costed once, two years ago, and never updated.
Each mistake makes a dish look more profitable than it is.
The four layers of a dish's True Cost
True Cost is the full cost of one portion. It has four layers:
Layer | What it includes | Saudi example |
Ingredients | Every item in the recipe, plus a wastage allowance | Coffee beans, milk, rice, chicken |
Labor | Time your direct staff spend making the dish | Barista or line cook minutes, including GOSI |
Packaging | Cups, lids, boxes, bags | Takeaway and delivery app orders |
Overhead | Shared costs spread over all portions | Kitchen rent, utilities, equipment, managers |
How to cost a dish in 7 steps
We will cost a 12 oz Spanish latte. All prices below are illustrative. Use your own supplier invoices.
Step 1: Write a standard recipe
Fix the exact quantity of every ingredient for one portion. This recipe also supports the nutrition details that the SFDA now requires on physical and digital menus (Gulf News).
Step 2: Convert purchase prices to usage units
Divide the purchase price by the quantity in usage units.
Coffee beans: SAR 120 ÷ 1,000 g = SAR 0.12 per g
Fresh milk: SAR 7 ÷ 1,000 ml = SAR 0.007 per ml
Condensed milk: SAR 16 ÷ 1,000 g = SAR 0.016 per g
Step 3: Add wastage
Multiply each ingredient cost by (1 + wastage %).
Ingredient | Quantity | Cost | Wastage | Cost with wastage |
Coffee beans | 18 g | SAR 2.16 | 3% | SAR 2.22 |
Fresh milk | 200 ml | SAR 1.40 | 5% | SAR 1.47 |
Condensed milk | 30 g | SAR 0.48 | 0% | SAR 0.48 |
Ingredients total | SAR 4.17 |
Step 4: Add Labor
A barista costs SAR 4,500 per month, including salary, allowances and GOSI. At 26 days of 8 hours, that is 12,480 minutes, or SAR 0.36 per minute. Two minutes per latte costs SAR 0.72.
Step 5: Add Packaging
Cup, lid and sleeve cost SAR 0.75 per takeaway order.
Step 6: Add Overhead
Add your monthly kitchen rent (apportioned by kitchen square metres), utilities, equipment depreciation and indirect staff. Divide by monthly portions. SAR 18,000 ÷ 6,000 portions = SAR 3.00 per portion.
Step 7: Compare with your net selling price
The latte sells for SAR 18 including VAT. Net price = 18 ÷ 1.15 = SAR 15.65.
Measure | Result |
True Cost per cup | SAR 8.64 |
Food cost % (ingredients ÷ net price) | 26.6% |
True Cost % (True Cost ÷ net price) | 55.2% |
Profit per cup | SAR 7.01 |
Notice the gap. On ingredients alone, the latte looks very profitable. With True Cost, more than half the net price is already spent. And if you wrongly divide by the VAT-inclusive SAR 18, food cost drops to 23.2%, which looks even better than reality.
Many restaurants target a food cost of 28% to 35% (Gordon Food Service). To price for a 28% target: 4.17 ÷ 0.28 = SAR 14.89 net, or SAR 17.13 with VAT.
Spreadsheet vs food costing software
Basis | Spreadsheet | Food costing software |
Setup cost | Free | Monthly or annual subscription |
Price updates | Manual, recipe by recipe | One update flows to every recipe |
Labor and Overhead | Separate sheets, easy to break | Built into each dish |
Errors | Formula and copy-paste risk | Calculated the same way every time |
Best for | Under 15 menu items | Growing menus and multiple branches |
A spreadsheet is a good start. It becomes hard to manage when you have many items and prices change every month.
What this means for your business
Cafés, cloud kitchens and bakeries with high delivery volume gain the most. Packaging and overhead are a bigger share of their cost.
Recipe costing does not fix everything. Your actual cost will still differ from your recipe cost because of portioning, theft and spoilage. But without a recipe cost, you cannot measure that gap at all.
Your recipe costing checklist
Write a standard recipe card for your top 10 sellers
Enter latest supplier prices from this month's invoices
Set a wastage % for every fresh ingredient
Time each dish and apply a per-minute Labor rate with GOSI
Add Packaging for takeaway and delivery versions
Calculate Overhead per portion from last month's costs
Remove 15% VAT before you calculate any percentage
Recost every month, or when a key price changes
Know the True Cost of every dish
I built MenuCost because I saw owners guess their margins. MenuCost calculates the True Cost of every dish across Ingredients, Labor, Packaging and Overhead, in SAR, with GOSI and VAT built in.
Start your 7-day free trial at menucost. No credit card required.
Frequently asked questions
How do you calculate the cost of a dish?
Add the cost of each ingredient (with wastage), Labor, Packaging and Overhead for one portion. The total is the dish's True Cost.
What is a good food cost percentage in Saudi Arabia?
No official Saudi benchmark exists. Many restaurants worldwide target 28% to 35%. Cafés often run lower because coffee ingredients cost less.
Should I include VAT in recipe costing?
No. Divide your costs by the net price, which is the menu price ÷ 1.15. VAT is collected for ZATCA.
How often should I update my recipe costs?
At least monthly. Update sooner when a major ingredient price, salary or rent changes.
Do I include GOSI in labor cost?
Yes. For expatriate staff, employers pay 2% for occupational hazards. Saudi employees carry a higher employer rate (Mercans).
Conclusion
Recipe costing is simple maths, but it must be complete. Count all four layers, remove VAT first and update costs every month. Start with your top 10 dishes this week. The numbers will show you which items make money and which ones only look like they do.