A lot of Canadian operators do the recipe math correctly and still miss target margin.
The usual issue is not the formula. It is mixing pre-tax and post-tax numbers while operating across provinces with different checkout taxes.
This guide keeps it simple: calculate cost and margin in pre-tax terms, then layer GST/HST for guest-facing final prices.
Core Formula (Pre-Tax)
Use this for every menu item:
Food cost % = Ingredient cost per serving / Pre-tax menu price x 100If you include sales tax in the denominator, your margin view becomes distorted.
GST/HST Quick Reference (Federal + Harmonized)
Canada applies a 5% federal GST. HST rates currently include:
- Ontario: 13% HST
- Nova Scotia: 14% HST
- New Brunswick: 15% HST
- Newfoundland and Labrador: 15% HST
- Prince Edward Island: 15% HST
Other provinces and territories may apply GST with separate provincial taxes. For internal costing, keep one standard rule: run margin on pre-tax price first.
Example #1: Base Food Cost Calculation
- Ingredient cost per serving: $4.40
- Pre-tax menu price: $16.00
4.40 / 16.00 x 100 = 27.5%This 27.5% is the value you compare against your target food cost range.
Example #2: Same Menu Price, Different Province Checkout
Assume a pre-tax menu price of $16.00.
| Province example | Tax treatment | Final checkout price |
|---|---|---|
| Ontario | 13% HST | $18.08 |
| Nova Scotia | 14% HST | $18.24 |
| Alberta | 5% GST | $16.80 |
Your food cost percentage stays 27.5% in all three cases because it is calculated from pre-tax price. Guest perception of affordability, however, changes with final checkout amount.
Inflation Context You Should Not Ignore
Statistics Canada reported that prices for food purchased from restaurants rose 8.5% year over year in December 2025. That pace was still above grocery inflation in the same release.
For operators, this is the practical takeaway: annual repricing is too slow in most categories. A monthly review cadence is safer.
Monthly Review Routine (Canada)
- Update top ingredient costs from current invoices.
- Recalculate food cost % for top-selling items in pre-tax terms.
- Check checkout prices by province for multi-region operations.
- Review delivery packaging and platform-related costs separately.
- Apply updates on one published date to avoid channel mismatch.
Related Guides
- Canada Menu Pricing Calculator
- Canada Menu Pricing Guide
- Canada GST/HST Restaurant Pricing Guide
- Canada Menu Price Review Checklist
- Recipe Costing Guide
- Prime Cost Guide
Want This Done Automatically?
KitchenCost recalculates recipe costs, food cost %, and price targets as your ingredient prices change.
If you want a faster way to protect margin, try KitchenCost.