Removing a loss-making dish can improve your margin directly. But by how much exactly? And what are the consequences for your total revenue? In this article you'll learn step-by-step how to calculate the exact margin impact of removing a dish.
Why loss-making dishes eat into your profit
Any dish with a food cost above 35-40% costs you money. But many entrepreneurs keep these dishes because they think: "It still brings in something, right?" That's not correct. A dish with 50% food cost means you're running at a loss after deducting labor costs and fixed expenses.
⚠️ Note:
A dish that "still brings in something" can drag down your overall profitability. Every time a guest chooses this dish instead of a profitable one, you lose money.
Calculate the current loss per dish
Before you remove a dish, you need to know how much loss it's currently generating. Here's the formula:
Loss per portion = Ingredient costs - (Selling price excl. VAT × Desired margin)
💡 Example:
You sell a ribeye steak for €38.00 (incl. 9% VAT):
- Selling price excl. VAT: €34.86
- Ingredient costs: €18.50
- Current food cost: 53%
- Desired food cost: 30%
Desired margin: €34.86 × 0.70 = €24.40
Loss per portion: €18.50 - €24.40 = -€5.90
Calculate the total margin impact per year
Now multiply the loss per portion by the number of times you sell this dish:
Annual impact = Loss per portion × Number of portions sold per year
💡 Example calculation:
The ribeye steak from the previous example:
- Loss per portion: €5.90
- Sales: 3 portions per week
- Per year: 3 × 52 = 156 portions
Annual impact: €5.90 × 156 = €920 loss
Factor in revenue loss
By removing a dish you also lose revenue. But this is only a problem if guests leave instead of choosing something else. In practice, 80-90% of guests choose an alternative from your menu.
Calculate the net effect like this:
- Revenue loss: Number of portions × Selling price
- Revenue retained: Revenue loss × 85% (on average 85% choose an alternative)
- Net revenue loss: Revenue loss × 15%
💡 Total calculation:
Removing the ribeye steak:
- Margin gain: +€920 per year
- Revenue loss: €38 × 156 = €5,928
- Net revenue loss: €5,928 × 15% = €889
- Alternative revenue: €5,039 (85% choose something else)
Net effect: +€920 margin gain with €889 revenue loss
Replace with a profitable alternative
Removing a dish is only half the solution. The other half is adding a profitable alternative in the same price range. This way you retain revenue and improve margin.
Look for a dish that:
- Has a comparable selling price
- Keeps food cost below 30%
- Appeals to the same target audience
- Is easy to prepare (no extra training)
⚠️ Note:
Test new dishes first as a daily special before adding them permanently to the menu. This prevents you from replacing one loss-making dish with another.
Measure results after 3 months
After removing the dish, measure whether your calculation was correct:
- Has your overall food cost percentage decreased?
- How many guests chose the new alternative?
- Has your average check value stayed the same?
- Have there been complaints about the removed dish?
If the numbers match your calculation, you can repeat this process for other loss-making dishes.
How do you calculate the margin impact? (step by step)
Calculate the current loss per portion
Ingredient costs minus (selling price excl. VAT × desired margin percentage). This shows how much you're currently losing per sold portion of this dish.
Multiply by annual sales
Count how many portions you sell per week and calculate × 52 weeks. Multiply this by the loss per portion for the total annual impact.
Factor in revenue loss and alternatives
Calculate the revenue loss, but subtract 85% (guests who choose an alternative). The net effect is margin gain minus actual revenue loss.
✨ Pro tip
Focus first on loss-making dishes that you sell frequently. A dish with €2 loss that you sell 5× per week costs you €520 per year. A dish with €8 loss that you sell 1× per month costs only €96 per year.
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
What if guests specifically come for this dish?
Then your revenue loss is higher than 15%. Measure this by tracking for 2 months how many guests leave vs. choose an alternative. Adjust your calculation accordingly.
Can't I just make the dish more expensive?
You can, but check if the market accepts that price. A ribeye steak for €45 instead of €38 might scare off customers. Test first with a daily special.
How do I know which dishes are loss-making?
Calculate the food cost of all your dishes. Anything above 35-40% is suspicious. Focus first on your best-selling dishes with high food cost — those cost you the most money.
Do I need to account for fixed costs?
Not for this calculation. Fixed costs (rent, insurance) you pay anyway. Focus on variable costs: ingredients, packaging, and any extra prep time.
When is removing better than adjusting?
When ingredient costs are structurally too high (expensive meat/fish) and price increases aren't possible. For low-volume dishes, removing is often the best option.
📚 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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