Happy hour always seems unprofitable because you're charging lower prices. But if it drives more volume and spreads your fixed costs over more sales, it can actually generate profit. The secret is in the right calculation: don't just compare the margin per drink, but look at the total contribution. In this article, you'll learn step by step how to calculate whether your happy hour promotion really pays off.
Why happy hour often DOES pay off (despite lower prices)
Most bartenders think: lower price = less profit. That's true per drink, but not per hour. Happy hour is all about volume and spreading your fixed costs over more sales.
💡 Example:
Normal: 20 beers between 5:00 PM-7:00 PM for €3.50 (excl. 21% VAT = €2.89)
- Cost per beer: €0.75
- Margin per beer: €2.89 - €0.75 = €2.14
- Total margin: 20 × €2.14 = €42.80
Happy hour: 45 beers for €2.50 (excl. VAT = €2.07)
- Margin per beer: €2.07 - €0.75 = €1.32
- Total margin: 45 × €1.32 = €59.40
Result: €16.60 more profit despite lower price!
The formula for happy hour ROI
To calculate whether your happy hour pays off, use this formula:
Happy Hour ROI = (Volume Happy Hour × Margin Happy Hour) - (Volume Normal × Margin Normal)
Where:
- Volume = number of drinks sold in that period
- Margin = selling price excl. VAT minus cost price
- Period = same time slot (e.g., 5:00 PM-7:00 PM)
⚠️ Important:
Always calculate with prices excl. VAT. Alcoholic beverages have 21% VAT, so €3.50 incl. VAT = €2.89 excl. VAT.
Additional factors that play a role
Beyond direct drink sales, there are more factors that can make your happy hour profitable:
Spreading fixed costs
Your staff, rent, and energy costs are the same whether you have 20 or 45 guests. More volume means these costs are spread over more sales.
Additional sales during happy hour
Guests who come for cheap drinks often also order food or more expensive drinks. Include these in your calculation.
💡 Example of additional sales:
Of 45 happy hour guests, 15 also order bitterballs (€6.50)
- Margin on bitterballs: approximately €4.00 per serving
- Additional margin: 15 × €4.00 = €60.00
- Total margin happy hour: €59.40 + €60.00 = €119.40
That's almost 3× more than without happy hour!
Guests who stay longer
Many happy hour guests stay after 7:00 PM and then pay normal prices. This is pure additional revenue you wouldn't have otherwise.
When happy hour DOESN'T pay off
Happy hour can also backfire. Watch out for these pitfalls:
- Too low margin: If you go below your cost price, you lose money on every drink
- Cannibalization: If guests only come during happy hour and never pay normal prices again
- Wrong target audience: Guests who only want cheap drinks and never order anything else
- Too long period: Happy hour from 4:00 PM-10:00 PM eats into your normal revenue
⚠️ Important:
Keep your happy hour limited to slow periods (e.g., 5:00 PM-7:00 PM). If you run it during busy evenings, you're replacing profitable sales with cheap sales.
Digitally tracking your happy hour results
To really know whether your happy hour pays off, you need to track the numbers. Note each week:
- Sales volume during happy hour
- Sales volume in the same period without the promotion
- Additional sales (food, more expensive drinks)
- Guests who stay after happy hour
An app like KitchenNmbrs helps you automatically track these numbers and calculate the actual margin per drink, including all additional costs.
How do you calculate whether happy hour pays off? (step by step)
Measure your current sales in that period
Count how many drinks you normally sell between, for example, 5:00 PM-7:00 PM. Do this for a few weeks to get an average. This is your baseline.
Calculate the margin per drink (normal vs happy hour)
Subtract your cost price from both prices (excl. 21% VAT). Normal price: €3.50 incl. = €2.89 excl. - €0.75 cost = €2.14 margin. Happy hour: €2.50 incl. = €2.07 excl. - €0.75 = €1.32 margin.
Compare the total margin of both scenarios
Multiply volume × margin for both situations. If happy hour generates more total margin than normal, it pays off. Don't forget to include additional sales (food, more expensive drinks).
✨ Pro tip
Start with a happy hour just 1 day per week and measure the results for 4 weeks. Then expand to more days if it proves profitable.
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
Do I need to include 21% VAT in my happy hour calculation?
No, always calculate with prices excl. VAT. Alcoholic beverages have 21% VAT, so €3.50 menu price = €2.89 excl. VAT for your calculation.
How long should a happy hour be to be profitable?
Usually 2-3 hours during a slow period (e.g., 5:00 PM-7:00 PM). Longer than 4 hours eats into your normal revenue. Shorter than 1 hour doesn't attract enough guests.
What if my happy hour guests never pay normal prices again?
Then you have cannibalization. Limit happy hour to specific days (e.g., only Tuesday/Wednesday) or make it temporary (1 month promotion, then evaluate).
Do I need to include all drinks in the happy hour?
No, focus on drinks with good margins. Beer and house wine work well. More expensive cocktails or premium spirits already have a lower pour cost, so you don't need to discount them further.
How do I measure whether guests stay after happy hour and order more?
Note how many guests are still there after 7:00 PM and what they order. Or use your POS system to see which orders start during happy hour but continue afterwards.
📚 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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