Promotions can make your restaurant busier while secretly bleeding your profits dry. Most restaurant owners discover they've been losing money on discounts only after reviewing their monthly numbers. Here's how to spot profit-killing deals before they damage your bottom line.
Why promotions drain profits
The trap? Focusing only on revenue numbers. Sure, more customers means higher sales, but that doesn't guarantee profit. Discounts can push your food costs so high that you earn less per customer - sometimes nothing at all.
⚠️ Watch out:
A packed restaurant running loss-making promotions is worse than a half-full restaurant with profitable pricing. You're working twice as hard for less money.
Calculate promotion costs accurately
Before launching any deal, you need three key numbers:
- Current food cost percentage for the dish
- Discounted selling price
- Additional expenses (extra staff, marketing costs, etc.)
Use this formula with your promotional pricing:
Promotional food cost = (Ingredient costs / Discounted price excl. VAT) × 100
💡 Example:
Your salmon dish normally sells for €32.00 (food cost 30%). With a 25% discount = €24.00.
- Ingredient costs: €8.80
- Discounted price excl. VAT: €24.00 / 1.09 = €22.02
- Promotional food cost: €8.80 / €22.02 × 100 = 40%
That's a jump from 30% to 40% food cost - a significant margin hit.
Determining profitable promotion thresholds
Keep promotional food costs under 45%. Beyond that threshold, your remaining margin won't cover operational expenses like labor, rent, and utilities.
But context matters:
- Low overhead costs? You can tolerate higher food costs
- High rent or payroll? Keep food costs tighter
- Promotion drives beverage sales? Drink margins can offset food losses
This is the kind of thing you only learn after closing your first month at a loss - promotional revenue means nothing if your costs exceed your margins.
Revenue versus profit reality
Many deals boost revenue while destroying profit. You won't see this until your monthly P&L arrives. That's why pre-launch calculations are essential.
💡 Example calculation:
Regular night: 80 guests × €28 average check = €2,240 revenue
Promotional night: 120 guests × €22 average check = €2,640 revenue
- Revenue increase: +€400
- But: food cost jumps from 30% to 40%
- Additional ingredient costs: €400
- Net profit gain: €0, but 50% more work
Better alternatives to straight discounts
Instead of slashing menu prices, try:
- Complimentary low-cost sides (house salad, bread basket)
- Bundled beverages (drinks have higher margins)
- Buy-one-get-one-half-off (increases table revenue)
- Early reservation incentives (improves planning)
These tactics boost revenue without destroying your food cost ratios.
⚠️ Watch out:
Always use prices excluding VAT for calculations. Menu prices include 9% VAT. Forgetting this makes your food costs appear artificially low.
Using tools for promotion analysis
Food cost calculators can run multiple scenarios quickly. You'll see exactly how discounts affect your margins without manual calculations. This prevents launching promotions that cost money instead of generating profit.
How do you calculate if a promotion is profitable? (step by step)
Calculate the normal food cost
Add up all ingredient costs of the dish. Divide this by your normal selling price excl. VAT and multiply by 100. This is your starting point.
Calculate the food cost at the promotion price
Use the same ingredient costs, but now divide by your promotion price excl. VAT. Multiply by 100 for the percentage.
Check if it's still profitable
If your food cost goes above 45%, you're probably losing money. Also add extra costs like more staff or marketing for the promotion.
✨ Pro tip
Run a 72-hour test promotion on just 2-3 menu items before committing to restaurant-wide deals. Track both food costs and total profit during this period.
Calculate this yourself?
In the KitchenNmbrs app you can do this in just a few clicks. 7 days free, no credit card.
Was this article helpful?
Frequently asked questions
What's an acceptable food cost for promotional pricing?
Stay below 45% food cost on promotions. Above that threshold, covering operational expenses like labor and rent becomes nearly impossible.
Should VAT be included in food cost calculations?
No, always calculate using prices excluding VAT. Menu prices include 9% VAT, but food cost calculations require the net price for accuracy.
How do I determine if increased volume offsets lower margins?
Calculate total profit: (guest count × average check × profit margin%). Compare this to a typical night to see if you're actually ahead. Don't forget to factor in additional operational costs from higher volume.
Can restaurants with low food costs handle bigger discounts?
Yes, if your normal food cost is 25%, you have more discount flexibility than restaurants running 35% food costs. But always stay below that 45% promotional threshold regardless of your starting point.
📚 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.
Calculate it yourself with KitchenNmbrs
All the formulas you learn here — KitchenNmbrs calculates them automatically. Enter your ingredients and instantly see your food cost, margin, and selling price. Try it free for 14 days.
Start free trial →