Inflation eats into your profit without you noticing. Your suppliers raise their prices, but you don't adjust your menu. After a year you're earning less on each dish, while your restaurant is just as busy. In this article you'll learn exactly how much inflation costs you and how to adjust your prices.
What does inflation do to your profit margin?
Inflation means everything gets more expensive. Your suppliers raise their prices, but many restaurant owners forget to raise their own prices too. The result: your food cost rises from, say, 30% to 35% without you noticing.
💡 Example:
Your pasta carbonara cost last year:
- Ingredients: €7.50
- Selling price: €22.00 (excl. VAT: €20.18)
- Food cost: 37.2%
After 8% inflation on ingredients:
- Ingredients: €8.10
- Selling price: still €22.00 (excl. VAT: €20.18)
- Food cost: 40.1%
You lose 2.9 percentage points margin per dish!
Calculate your inflation loss per dish
For each dish you can work out how much inflation costs you. You need: the old ingredient costs, the inflation percentage and your current selling price.
Formula new food cost:
New food cost % = (Old ingredient costs × (1 + inflation%)) / Selling price excl. VAT × 100
💡 Calculation example:
Steak with 12% inflation on meat:
- Old ingredient costs: €12.00
- New ingredient costs: €12.00 × 1.12 = €13.44
- Selling price: €42.00 excl. VAT = €38.53
- New food cost: €13.44 / €38.53 × 100 = 34.9%
Was: 31.1% → Now: 34.9% = 3.8 percentage point loss!
Calculate the impact on an annual basis
You see the real impact when you work out what this costs per year. Multiply the margin loss by your total turnover.
Formula annual loss:
Annual loss = (Percentage point loss / 100) × Annual turnover
💡 Impact on annual basis:
Restaurant with €400,000 annual turnover:
- Average margin loss from inflation: 3 percentage points
- Annual loss: 0.03 × €400,000 = €12,000
Inflation costs you €12,000 per year if you do nothing!
⚠️ Note:
Inflation works cumulatively. After two years of 8% inflation your ingredients have become 16.6% more expensive, not 16%. So calculate: 1.08 × 1.08 = 1.166 = 16.6% increase.
What selling price do you need?
To maintain your margin, you need to raise your selling price. First calculate how much your ingredients cost now, then calculate the new minimum selling price.
Formula new selling price:
New selling price excl. VAT = New ingredient costs / (Desired food cost% / 100)
💡 Calculate price adjustment:
Pasta that should stay at 30% food cost:
- New ingredient costs: €8.10
- Desired food cost: 30%
- New selling price excl. VAT: €8.10 / 0.30 = €27.00
- New menu price: €27.00 × 1.09 = €29.43
From €24.00 to €29.43 = €5.43 increase needed
Check your top dishes first
You don't need to recalculate your entire menu at once. Focus on your best-selling dishes - they determine 80% of your profit.
- List your 10 best-selling dishes
- Calculate the new food cost for each dish after inflation
- Check which dishes exceed your desired food cost
- Calculate the new selling price for those dishes
- Plan phased price increases (not all at once)
⚠️ Note:
Don't raise all prices at once by 10%. Customers get scared by big jumps. Raise gradually: first your most expensive dishes, then the rest. Spread it over 2-3 months.
Track inflation structurally
Inflation doesn't stop after this year. Make it a routine to check your food cost every quarter and adjust your prices where needed.
With a system like KitchenNmbrs you can see directly which dishes become too expensive and adjust quickly without having to calculate manually.
How do you calculate inflation impact? (step by step)
Gather your current data
Note for your 5 best-selling dishes: the current ingredient costs, the selling price and the current food cost percentage. These are your reference figures.
Calculate new ingredient costs
Multiply your current ingredient costs by (1 + inflation percentage). At 8% inflation: €10.00 × 1.08 = €10.80 new costs per dish.
Calculate new food cost percentage
Divide the new ingredient costs by your current selling price (excl. VAT) and multiply by 100. This shows how much your margin has dropped.
Calculate required price increase
Divide the new ingredient costs by your desired food cost percentage. Multiply by 1.09 for the new menu price including 9% VAT.
✨ Pro tip
Check not just your food cost, but also your competitors'. Go eat at comparable restaurants once and compare their prices with yours. Often you can raise prices more than you think.
Calculate this yourself?
In the KitchenNmbrs app you can do this in just a few clicks. 7 days free, no credit card.
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Frequently asked questions
How often should I adjust my prices for inflation?
Check your food cost on your best-selling dishes every quarter. If the food cost has risen more than 2 percentage points, adjust your prices then. Don't wait until the end of the year.
Can I raise all prices at once?
Better not. Customers get scared by big jumps. Raise your most expensive dishes first, then the mid-range. Spread it over 2-3 months for less resistance.
What if my competitors don't raise their prices?
Their problem becomes your advantage in the long run. They lose money on each dish. You keep your margins healthy and can invest in quality and service.
How do I explain price increases to customers?
Be honest: ingredients have become more expensive due to inflation. Most customers understand this. Focus on quality: 'We continue to work with the same top-quality ingredients.'
Do I need to account for inflation on all ingredients?
Not all ingredients rise equally. Meat and fish often rise more than vegetables. Check with your supplier which products have risen the most and focus there.
What if I've already raised my prices recently?
Then you may have already built in a buffer. Still calculate your current food cost - maybe you're still within your desired margin and don't need to do anything for now.
📚 Sources consulted
- EU Verordening 852/2004 — Levensmiddelenhygiëne (2004) — Official source
- EU Verordening 853/2004 — Hygiënevoorschriften voor levensmiddelen van dierlijke oorsprong (2004) — Official source
- EU Verordening 1169/2011 — Voedselinformatie aan consumenten (2011) — Official source
- NVWA — Hygiënecode voor de horeca (2024) — Official source
- NVWA — Allergenen in voedsel (2024) — Official source
- Codex Alimentarius — International Food Standards (2024) — Official source
- FSA — Safer food, better business (HACCP) (2024) — Official source
- BVL — Lebensmittelhygiene (HACCP) (2024) — Official source
- Warenwetbesluit Bereiding en behandeling van levensmiddelen (2024) — Official source
- WHO — Foodborne diseases estimates (2024) — Official source
Food Standards Agency (FSA) — https://www.food.gov.uk
The HACCP standards shown in this application are for informational purposes only. KitchenNmbrs does not guarantee that displayed values are current or complete. Always consult the FSA or your local authority for the latest regulations.
Written by
Jeffrey Smit
Founder & CEO of KitchenNmbrs
Jeffrey Smit built KitchenNmbrs from 8 years of hands-on experience as kitchen manager at 1NUL8 Group in Rotterdam. His mission: give every restaurant owner control over food cost.
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