A 10% ingredient price increase can destroy 3-4 percentage points of your profit margin overnight. Your suppliers quietly raise prices, but most restaurant owners keep their menu prices frozen, causing food costs to creep up while earning less per dish.
A 10% ingredient price increase can destroy 3-4 percentage points of your profit margin overnight. Your suppliers quietly raise prices, but most restaurant owners keep their menu prices frozen. The result? Your food costs creep up while you earn less per dish - often without noticing until it's too late.
Why inflation eats into your profit
Inflation creeps in slowly. Your beef supplier bumps prices by 12%. Oil jumps 18%. Vegetables climb 8%. But your menu? Same prices as last year.
⚠️ Watch out:
If your ingredients become 10% more expensive but your selling price stays the same, your food cost percentage automatically goes up too. A dish with 30% food cost becomes 33% food cost.
Calculate the impact on your food cost
Here's how you track what inflation does to your margins:
💡 Example:
Steak on your menu for €32.00 (incl. 9% VAT):
- Selling price excl. VAT: €29.36
- Old ingredient costs: €9.00
- Old food cost: (€9.00 / €29.36) × 100 = 30.7%
After 12% inflation on ingredients:
- New ingredient costs: €9.00 × 1.12 = €10.08
- New food cost: (€10.08 / €29.36) × 100 = 34.3%
Impact: 3.6 percentage points higher!
Calculate your new minimum selling price
To keep your original margin, you'll need to adjust your selling price. Here's the formula:
New selling price excl. VAT = New ingredient costs / (Desired food cost % / 100)
💡 Example calculation:
You want to maintain 30.7% food cost:
- New ingredient costs: €10.08
- Minimum price excl. VAT: €10.08 / 0.307 = €32.83
- Price incl. 9% VAT: €32.83 × 1.09 = €35.78
You need to go from €32.00 to €35.78 - an increase of €3.78
Calculate impact on an annual basis
Here's what it costs you if you don't adjust your prices:
Annual loss = Difference in food cost % × Annual revenue from this dish
💡 Example annual calculation:
You sell steak 150 times per month:
- Annual revenue from this dish: 150 × 12 × €29.36 = €52,848
- Food cost difference: 34.3% - 30.7% = 3.6 percentage points
- Extra costs per year: 0.036 × €52,848 = €1,903
This one dish costs you €1,903 extra per year!
Phased price adjustments
You don't need to shock customers with massive price jumps. Many restaurants roll out increases gradually:
- Month 1-2: Raise your 3 most expensive dishes
- Month 3-4: Adjust your most popular dishes
- Month 5-6: Update the rest of your menu
This prevents guests from spotting all price increases at once. From tracking this across dozens of restaurants, the phased approach generates fewer complaints than bulk increases.
⚠️ Watch out:
Check your supplier invoices regularly. Prices can rise multiple times per year. What you calculated in January might not be accurate in June.
Tools to keep track
Manual tracking eats up hours every month. Food cost calculators automatically show what inflation does to your margins. You update purchase prices and instantly see which dishes become unprofitable.
This keeps you ahead of the curve without recalculating everything monthly.
How do you calculate the impact of inflation? (step by step)
Gather your current figures
Note for each dish: current ingredient costs, selling price excl. VAT, and current food cost percentage. These are your starting points.
Calculate new ingredient costs
Multiply your current ingredient costs by the inflation percentages from your suppliers. For example: €9.00 × 1.12 = €10.08 at 12% inflation.
Calculate new food cost percentage
Divide the new ingredient costs by your current selling price excl. VAT and multiply by 100. This shows your new food cost percentage.
Determine new selling price
Divide your new ingredient costs by your desired food cost percentage. Multiply by 1.09 for the price incl. 9% VAT.
Calculate impact on an annual basis
Multiply the difference in food cost percentage by the annual revenue from that dish. This shows you how much inflation costs you per year.
✨ Pro tip
Track your food cost weekly during high inflation periods (above 5% annually). Monthly checks miss rapid price swings that can destroy your margins between reviews.
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 supplier invoices at least quarterly. Some ingredients rise in price more often than others. Vegetables and fish fluctuate more than meat or dairy.
What if my competitor doesn't raise their prices?
They're probably losing money on their dishes. Focus on your own numbers. A competitor selling below their cost price won't last long.
Should I calculate with or without VAT?
For food cost calculations always without VAT. The price on your menu is including 9% VAT, but for your margin you calculate with the price excluding VAT.
What if only a few ingredients become more expensive?
Calculate the impact per dish separately. A dish with lots of beef is hit harder by meat price increases than a vegetarian dish. Only adjust dishes that really become too expensive.
📚 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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