Energy prices are rising sharply and that hits your profit directly. Many restaurant owners forget that higher energy costs mean you need to adjust your food cost targets to...
Last month, a restaurant owner watched his energy bill jump from €2,100 to €3,200 overnight. Most operators forget that higher energy costs mean you need to adjust your food cost targets to maintain the same margin. Here's your step-by-step approach to recalculating targets after energy price increases.
Why energy costs affect your food cost targets
Your total costs consist of more than just ingredients. Besides food cost, you also have energy costs, labor, and other expenses. If energy becomes more expensive, your food cost needs to be lower to maintain the same total margin.
💡 Example:
Restaurant with €500,000 annual revenue:
- Food cost: 30% (€150,000)
- Energy costs: 5% (€25,000)
- Labor: 35% (€175,000)
- Other costs: 20% (€100,000)
Total costs: 90% - Profit: 10%
If energy costs rise from 5% to 8% (€15,000 extra), your total costs increase to 93%. Your profit drops from 10% to 7%.
Calculate your new energy cost percentage
First, you need to know how much your energy costs have increased as a percentage of your revenue.
💡 Energy cost calculation:
Formula: Energy cost % = (Annual energy costs / Annual revenue) × 100
- Old energy bill: €2,100/month = €25,200/year
- New energy bill: €3,200/month = €38,400/year
- Annual revenue: €500,000
Old: (€25,200 / €500,000) × 100 = 5.0%
New: (€38,400 / €500,000) × 100 = 7.7%
Your energy costs have increased by 2.7 percentage points. You need to compensate for this somewhere else.
Recalculate your desired total margin
First, determine what total margin you want to maintain. Most restaurants aim for 8-15% net profit.
⚠️ Note:
If you do nothing, the energy increase will eat into your profit. From 10% profit to 7.3% profit in the example above.
You have three options:
- Raise prices: Increase your menu prices by 2.7%
- Lower food cost: Adjust recipes or find cheaper ingredients
- Combination: Split the impact (e.g., 1.5% price increase + 1.2% lower food cost)
Calculate your new food cost target
If you choose to lower food cost, calculate your new target like this:
💡 New food cost calculation:
Formula: New food cost % = Old food cost % - Energy increase %
- Old food cost target: 30%
- Energy increase: 2.7 percentage points
- New food cost target: 30% - 2.7% = 27.3%
You need to lower your food cost from 30% to 27.3%
Translate to maximum ingredient costs
With your new food cost target, you can calculate how much you're allowed to spend on ingredients per dish.
💡 Practical example:
Steak on menu: €32.00 incl. 9% VAT
- Selling price excl. VAT: €32.00 / 1.09 = €29.36
- At 30% food cost: max €8.81 ingredients
- At 27.3% food cost: max €8.01 ingredients
You need to save €0.80 per portion on ingredients
Monitor and adjust monthly
Energy prices continue to fluctuate. Therefore, check your energy costs monthly and adjust your food cost targets as needed. From years of working in professional kitchens, I've seen restaurants that ignore these fluctuations lose 3-4% profit margin in just six months.
- Compare energy bill with previous month
- Calculate energy costs as % of revenue
- Adjust food cost targets for major changes (>0.5 percentage points)
- Review your top-selling items first
A system like tools like KitchenNmbrs helps you automatically track your food cost per dish, so you can quickly see which dishes exceed your new target.
How do you adjust food cost targets? (step by step)
Calculate your new energy cost percentage
Divide your new monthly energy bill by your monthly revenue and multiply by 100. Compare with your old percentage to see the increase.
Determine your compensation strategy
Choose whether you'll compensate for the energy increase through higher prices, lower food cost, or a combination. Calculate the exact percentage you need to adjust.
Recalculate maximum ingredient costs per dish
Adjust your food cost target and calculate for each dish how much you're allowed to spend on ingredients. Start with your best-selling dishes.
✨ Pro tip
Review your energy bill against revenue every 30 days during volatile periods. Even a €200 monthly increase can shift your food cost target by 0.5% if revenue stays flat.
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
Should I raise my prices or lower food cost?
That depends on your market and competitors. If everyone's raising prices, you can follow suit. Otherwise, lowering food cost is often easier than losing customers to higher prices.
How often should I adjust my food cost targets?
Check your energy costs monthly. Adjust targets for changes of more than 0.5 percentage points. For large fluctuations (>1%), adjust immediately.
Which dishes should I adjust first?
Start with your top-selling dishes. They have the biggest impact on your total food cost. Then move to the dishes with the highest margin.
Can I include energy costs in my cost price per dish?
Yes, you can. Calculate your energy costs per cover and add that to your ingredient costs. This way you see the true cost price including energy per dish.
📚 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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