Better margins are the key to a future-proof restaurant. Many restaurant owners focus on more revenue, but forget that profit only comes when you have...
83% of restaurants that survive economic downturns have food costs below 32%. Most restaurant owners chase higher revenue while their margins slowly erode. Strong margins protect your business against inflation, supply chain disruptions, and changing customer behavior.
Why margins matter more than revenue
A packed dining room doesn't guarantee profitability. Too many restaurant owners fall into these traps:
- They chase more covers instead of better margins
- They cut prices to beat competitors
- They ignore creeping food costs
- They don't plan for inflation
💡 Example:
Restaurant A: 200 covers/day, €25 average bill, 35% food cost
- Revenue per day: €5,000
- Food cost: €1,750
- Other costs: €2,500
Profit: €750/day = €274,000/year
💡 Compare with:
Restaurant B: 150 covers/day, €30 average bill, 28% food cost
- Revenue per day: €4,500
- Food cost: €1,260
- Other costs: €2,200
Profit: €1,040/day = €379,600/year
Restaurant B generates less revenue but earns €105,600 more annually through tighter margins.
The three pillars of healthy margins
Sustainable profitability depends on three core elements:
1. Food cost under control
Keep your food cost between 28% and 35%, regardless of supplier price increases.
⚠️ Note:
Always calculate using selling prices excluding VAT. Menu prices include 9% VAT for food items.
Formula: Food cost % = (Ingredient costs / Selling price excl. VAT) × 100
2. Flexible menu
Swap out dishes that become unprofitable for alternatives with better margins. Monitor which items drive the most revenue per square foot.
3. Efficient purchasing
Base purchasing decisions on actual sales data, not intuition. Reduce waste through precise forecasting and inventory management.
Practical steps for better margins
Execute these specific actions:
- Week 1: Calculate food cost for your top 5 revenue-generating dishes
- Week 2: Identify suppliers who've increased prices in the last quarter
- Week 3: Measure food waste from the previous 30 days
- Week 4: Implement necessary menu price adjustments
💡 Example calculation:
Your steak sells for €32.00 on the menu (incl. 9% VAT)
- Selling price excl. VAT: €32.00 / 1.09 = €29.36
- Ingredient costs: €11.20
- Food cost: (€11.20 / €29.36) × 100 = 38.1%
Too high! Target maximum 33% for meat dishes.
From analyzing actual purchasing data across different restaurant types, fine dining establishments can sustain slightly higher food costs due to premium pricing, while fast-casual operations must maintain stricter cost controls.
Price adjustments without losing customers
You can raise prices strategically without driving away business:
- Implement gradual increases (€1-2 increments)
- Start with your most popular dishes
- Launch new, higher-margin menu items
- Focus on value proposition, not price
⚠️ Note:
Avoid across-the-board price increases. Customers spot this immediately. Spread changes across 2-3 months instead.
Technology as a tool
Manual calculations consume time and create errors. Food cost management systems help you:
- Calculate dish-level food costs automatically
- Update menu prices when supplier costs change
- Compare profitability across menu items
- Monitor margin trends over time
This eliminates hours of weekly calculations and provides real-time profitability insights.
Stay future-proof
Margin improvement requires ongoing attention. Establish this schedule:
- Monthly: Review food cost for all menu items
- Quarterly: Analyze top revenue-generating dishes
- Half-yearly: Conduct comprehensive menu evaluation
- Annually: Set profitability improvement goals
This keeps you ahead of rising costs and shifting market conditions.
How do you improve your margins step by step?
Calculate your current food cost
Add up all ingredient costs of your 5 best-selling dishes. Divide this by the selling price excluding VAT and multiply by 100 to get the percentage.
Identify problem dishes
Dishes with a food cost above 35% are costing you money. Note which dishes have become too expensive due to supplier price increases.
Adjust prices or recipes
Raise selling prices by €1-2 or replace expensive ingredients with cheaper alternatives. Test what works best for your business and customers.
Monitor monthly
Track how your margins develop each month. Suppliers regularly raise prices, so keep your food cost in check.
Build a routine
Make margin control a standard part of your operations. This prevents problems from piling up into major losses.
✨ Pro tip
Audit your top 8 revenue-generating dishes every 6 weeks - these typically represent 60% of your total food sales. Control these margins and you'll stabilize your entire cost structure.
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Frequently asked questions
What is a healthy margin for my restaurant?
Food cost between 28% and 35% works for most restaurants. Fine dining can push to 35%, while casual dining should stay below 32%. Your specific target depends on your concept and local market.
How often should I adjust my prices?
Review food costs monthly and adjust prices 2-3 times annually if needed. Small, regular increases are less noticeable than dramatic jumps.
Can I improve my margins without raising prices?
Absolutely. Optimize purchasing, control portion sizes, reduce waste, and substitute expensive ingredients with quality alternatives. Menu engineering can also shift customers toward higher-margin items.
What if customers leave after a price increase?
Increase gradually (€1-2 at a time) starting with popular dishes. Emphasize value and quality improvements. Most customers accept reasonable increases if you communicate the reasons clearly.
How do I prevent suppliers from destroying my margins?
Track price changes immediately and adjust menu prices accordingly. Develop relationships with multiple suppliers and negotiate volume discounts. Consider seasonal menu changes to work with price fluctuations.
Should I focus on reducing food cost percentage or increasing revenue per dish?
Both matter, but food cost control comes first. A dish with 25% food cost at €20 generates more profit than one with 35% food cost at €25. Master your costs, then work on revenue optimization.
How do seasonal ingredients affect my margin strategy?
Build seasonal price variations into your menu planning. Use high-cost ingredients when they're in season and profitable, then rotate to alternatives. This maintains margins while offering variety throughout the year.
📚 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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