Margin equals selling price (excluding VAT) minus total ingredient costs. Aim for margins that are 3x your ingredient costs to cover overhead and generate profit. Track your most popular dishes monthly since supplier price changes can quickly turn winners into losers.
Your Tuesday special with salmon costs €7.20 in ingredients and sells for €24.50—but are you actually making money? Most restaurant owners guess at their margins, unknowingly bleeding cash on popular dishes. Here's how to calculate your exact profit per plate.
What is margin and why is it important?
Margin is the euros left after you subtract ingredient costs from your selling price. Unlike food cost percentage, margin shows you the actual cash each dish puts in your pocket. Both numbers matter, but margin tells you if a dish pays the bills.
💡 Example:
Dish of the day: Salmon with vegetables for €24.50 incl. VAT
- Selling price excl. VAT: €22.48
- Ingredient costs: €7.20
Margin: €22.48 - €7.20 = €15.28 per portion
The formula for margin calculation
The math is straightforward:
Margin = Selling price excl. VAT - Ingredient costs
Always work with prices excluding VAT. Your menu shows prices with 9% VAT for restaurant food, but that money goes straight to the tax office.
⚠️ Note:
Count every ingredient that touches the plate: main course, sides, sauces, cooking oil, butter, even that sprig of parsley. Small costs add up fast.
Calculate ingredient costs correctly
Accurate margins require counting everything:
- Main ingredient: fish, meat, vegetarian protein
- Side dishes: potatoes, rice, vegetables
- Sauces and dressings: every tablespoon counts
- Cooking fats: oil and butter for prep and finishing
- Seasonings: herbs and spices seem cheap but accumulate
- Garnish: parsley, lemon wedge, microgreens
💡 Example ingredient costs:
Salmon fillet with vegetables and mashed potatoes:
- Salmon 180g: €4.20
- Vegetable mix 150g: €1.10
- Potatoes 200g: €0.40
- Butter and cream: €0.60
- Sauce and herbs: €0.70
- Oil for cooking: €0.20
Total ingredient costs: €7.20
From margin to profitability
A healthy margin doesn't guarantee profit. Your margin still needs to cover:
- Staff wages (kitchen and front of house)
- Rent and utilities
- Equipment depreciation and repairs
- Marketing and admin expenses
From years of working in professional kitchens, I've seen this rule hold true: your margin should be at least 3x your ingredient costs to cover overhead and generate profit.
💡 Example profitability:
With €7.20 ingredient costs you need at least €21.60 excl. VAT (€23.54 incl. VAT) to stay profitable.
Your €22.48 excl. VAT falls short. Time to tweak that price.
Improve margin: 3 practical tips
1. Measure your portions for consistency
Weigh portions for one week. Kitchens often serve generous portions without realizing it. An extra 20g salmon per dish costs €1,200 annually at 100 weekly portions.
2. Calculate cutting waste accurately
Whole fish looks cheaper per kilo, but trimming waste often makes pre-cut fillets more economical. Do the math per finished dish.
3. Use ingredient tiers strategically
Save premium ingredients for finishing touches. Use expensive olive oil for drizzling, regular oil for cooking.
Digital vs. manual tracking
Spreadsheets work but eat time and hide errors. Especially problematic when supplier prices shift or you modify recipes.
Digital tools automatically recalculate margins and alert you when supplier price increases push your food costs above target thresholds.
How do you calculate the margin on your dish of the day?
Calculate the selling price excluding VAT
Divide your menu price by 1.09 to remove the 9% VAT. For example: €24.50 / 1.09 = €22.48 excl. VAT.
Add up all ingredient costs
Note all ingredients: main course, side dishes, sauces, oil, butter, herbs and garnish. Don't forget anything that goes on the plate.
Subtract ingredient costs from selling price
Margin = €22.48 - €7.20 = €15.28. This is what's left for all other costs and profit. Check if this is at least 3x your ingredient costs.
✨ Pro tip
Calculate margins on your Tuesday-Thursday specials first—these mid-week dishes often have the tightest margins since you're competing harder for customers. Get these three days right and you'll stabilize your weekly profit.
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 include VAT in my margin calculation?
Never include VAT in margin calculations. You collect VAT for the tax authority, so it's not your revenue. For restaurant food, that's 9% VAT you'll pass along.
What is a good margin for a dish of the day?
Your margin should be at least 3x your ingredient costs. With €7 in ingredients, you need €21 minimum (excl. VAT) to cover all expenses and generate profit.
How often should I check my margins?
Review your top-selling dishes monthly at minimum. Supplier prices fluctuate constantly, turning last month's profitable dish into this month's loss leader without warning.
Should I include personnel costs in the margin?
No, margin only covers selling price minus ingredient costs. Staff wages, rent, and other overhead come out of your margin afterward. That's why margins need to be substantial.
What if my margin is too low?
You have three choices: increase the selling price, reduce ingredient costs through smaller portions or cheaper alternatives, or eliminate the dish if it's consistently unprofitable.
How do I handle seasonal price fluctuations in ingredients?
Track ingredient costs weekly during peak season changes. Consider flexible menu pricing or substitute ingredients when core items spike above your target food cost percentage.
📚 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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