Your margin determines whether you make or lose money on each dish. Many restaurant owners don't know when their margin is too low, which means they're unknowingly losing money.
Your dish margins decide if you're making money or slowly going broke. Most restaurant owners can't tell when their margins hit dangerous levels. You might be hemorrhaging cash on every plate without knowing it.
What is a healthy margin?
Food costs should stay between 28% and 35% for most restaurants. This means roughly one-third of your menu price covers ingredients - the rest handles labor, rent, and profit.
💡 Example:
You sell a pasta for €22.00 incl. VAT (€20.18 excl. VAT):
- Ingredient costs: €6.50
- Food cost: (€6.50 / €20.18) × 100 = 32.2%
This represents a healthy margin for a restaurant.
When is your margin too low?
Your margins are definitely problematic if:
- Food costs climb past 35% - You're leaving almost nothing for other expenses
- You're busy but barely breaking even - Classic sign of razor-thin margins
- Price increases terrify you - Your margins can't handle any flexibility
- Supplier hikes destroy your month - No cushion for unexpected costs
⚠️ Note:
Always calculate with the selling price EXCLUDING VAT. The price on your menu includes 9% VAT. €22.00 incl. VAT = €20.18 excl. VAT.
Calculate your actual margin
The math is simple, but you need every single ingredient:
Food cost % = (Total ingredient costs / Selling price excl. VAT) × 100
Include everything:
- All main ingredients
- Garnishes and decoration
- Sauces and dressings
- Oil and butter for preparation
- Bread and side dishes
💡 Example: Steak calculation
Menu price: €32.00 incl. VAT (€29.36 excl. VAT)
- Steak 200g: €7.20
- Fries 150g: €0.45
- Salad and tomato: €0.80
- Sauce: €0.35
- Butter for cooking: €0.20
Total: €9.00
Food cost: (€9.00 / €29.36) × 100 = 30.7%
Signs that your margins are too low
Look for these red flags in your operations:
- Cash flow stays tight despite good sales - Revenue comes in, but money disappears fast
- Equipment upgrades become pipe dreams - No budget for necessary improvements
- Every supplier increase causes stress - Small cost bumps hit your bottom line hard
- You can't afford additional staff - Even during busy periods
Based on real restaurant P&L data from over 200 establishments, restaurants with food costs above 36% struggle to maintain positive cash flow even during their busiest months.
What to do about low margins?
You've got three main moves:
- Bump up menu prices - Usually the fastest fix
- Cut ingredient costs - Find cheaper suppliers or trim portions slightly
- Rework your recipes - Use less expensive ingredients without sacrificing taste
💡 Example: Impact of price increase
Current situation: €32.00 menu price, €9.00 ingredients = 30.7% food cost
After increase to €35.00: €9.00 ingredients on €32.11 excl. VAT = 28.0% food cost
Result: €2.75 extra margin per dish
Smart restaurant owners use tracking tools to monitor their margins automatically and spot problem dishes before they drain profits.
How do you check if your margin is too low? (step by step)
Choose your 5 best-selling dishes
Start with the dishes you sell the most. These have the biggest impact on your total profit. Grab your POS system and check which 5 dishes go over the counter most often.
Add up all ingredient costs per dish
Write down EVERY ingredient: main course, garnish, sauces, oil, butter, bread. Don't forget anything. Add up the costs to the last cent. This is your total ingredient cost per portion.
Calculate your food cost percentage
Divide your ingredient costs by your selling price EXCLUDING VAT and multiply by 100. For example: €8.50 ingredients divided by €25.69 selling price = 33.1% food cost.
✨ Pro tip
Track your 6 bestselling dishes every two weeks - if any hit 35% food cost for more than 14 consecutive days, you're heading into dangerous territory. Act before you're deep in the red.
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 if all my dishes are above 35% food cost?
You're bleeding money fast. Start with your three highest-volume dishes and either raise prices or cut ingredient costs immediately. Don't try to fix everything at once - focus on what sells most.
How often should I check my margins?
Check your top sellers monthly at minimum. Supplier prices change constantly, so last month's profitable dish might be losing money today. During periods of high inflation, check weekly.
What if I lose customers after raising prices?
Test increases on your least popular items first, or add premium versions alongside existing dishes. Most restaurants lose fewer customers than expected, and it's better to have slightly fewer guests with healthy profits than a packed house that's going broke.
📚 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 →