A supplier price increase directly hits your profit. Most restaurant owners underestimate the real impact and adjust menu prices too late. Calculate exactly what a price increase costs and explore your options.
Supplier price increases can wipe out your profit margin overnight. Most restaurant owners underestimate the real damage and react too slowly. Here's how to calculate the exact impact and decide your next move.
Calculate the impact on your food cost percentage
A price increase raises your ingredient costs, which pushes up your food cost percentage. This calculation shows you exactly where you stand.
💡 Example:
Your pasta carbonara currently has a food cost of 28%. Your supplier raises bacon prices by 20%.
- Current ingredient costs: €5.10
- Bacon costs in recipe: €1.80
- New bacon costs: €1.80 × 1.20 = €2.16
- New total costs: €5.10 - €1.80 + €2.16 = €5.46
New food cost: 30.1% (was 28%)
The formula is simple: New food cost % = (New ingredient costs / Sales price excl. VAT) × 100
Calculate the impact on an annual basis
To see the real damage, calculate what this costs you per year. This number helps you decide if you need to raise prices.
💡 Example:
Your carbonara example from above:
- Extra costs per portion: €0.36
- Sales: 15 portions per week
- Per year: €0.36 × 15 × 52 = €281
For one dish this seems manageable, but add up all dishes that contain this ingredient.
The formula: Annual impact = Extra costs per portion × Portions per week × 52
⚠️ Note:
Check all dishes that contain the ingredient that got more expensive. A beef price increase might affect 8 different dishes on your menu.
Three options to deal with it
Once you've calculated the impact, you have three choices. Each has trade-offs - the kind of thing you only learn after closing your first month at a loss.
- Option 1: Raise menu price - protects your margin, but might scare off customers
- Option 2: Keep price the same - customers stay happy, but you earn less
- Option 3: Adjust the dish - use different ingredients to cut costs
Calculate the new sales price
Want to preserve your margin? Then you'll need to adjust your menu price. The math is straightforward.
💡 Example:
You want to keep your food cost at 28%:
- New ingredient costs: €5.46
- Desired food cost: 28%
- New price excl. VAT: €5.46 / 0.28 = €19.50
- New price incl. 9% VAT: €19.50 × 1.09 = €21.26
Your current price was €18.50. So you need to go up €2.76.
The formula: New price excl. VAT = New ingredient costs / (Desired food cost % / 100)
Should you raise or not raise?
You don't need to calculate every price increase. It depends on the dish and your market position.
- Do raise: For popular dishes you sell lots of
- Do raise: If your food cost goes above 35%
- Consider: For dishes that are already expensive compared to competitors
- Don't raise: For loss-leaders that attract customers
⚠️ Note:
Don't raise all prices at once. Spread it over a couple of months and start with your biggest sellers.
Some restaurant management systems automatically calculate what price increases do to your food cost and show which dishes get hit hardest.
How do you calculate the impact of a price increase? (step by step)
Calculate the new ingredient costs
Take your current recipe costs and increase the relevant ingredient by the new percentage. Example: bacon was €1.80, becomes 20% more expensive = €2.16. Add up all ingredients for the new total price.
Calculate your new food cost percentage
Divide your new ingredient costs by your current sales price (excl. VAT) and multiply by 100. This shows what percentage of your sales price now goes to ingredients.
Calculate the impact on an annual basis
Multiply the extra costs per portion by the number of portions you sell per week, then by 52. This gives you the total annual impact of this price increase.
✨ Pro tip
Calculate the annual impact on your 3 highest-volume dishes within 48 hours of any supplier increase. This quick check reveals 70% of your real exposure before it hits your bottom line.
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 price if my supplier becomes 10% more expensive?
That depends on your current food cost. If you're under 30%, you can often absorb it. Above 35% it gets tough and raising the price makes sense.
How often do suppliers raise their prices?
On average 1-2 times per year, often in January and sometimes in summer. Meat and fish can fluctuate more frequently due to seasons and market conditions.
What if I can't raise my price because of competition?
Then you can adjust the recipe: smaller portions, cheaper ingredients, or a different side dish. But keep the quality customers expect.
How do I communicate a price increase to customers?
Do it quietly without big announcements. Print new menus and explain if customers ask. Mention rising costs, most people understand that.
📚 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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