Should you keep that ribeye steak that's bleeding money every time someone orders it? Removing a loss-making dish improves your margin directly, but calculating the exact impact requires more than basic math. You'll need to crunch the numbers and make the right call.
Why loss-making dishes eat into your profit
Any dish with a food cost above 35-40% costs you money. Many restaurant owners keep these dishes thinking: "It still brings in something, right?" Wrong. A dish with 50% food cost means you're operating at a loss after factoring in labor and overhead.
⚠️ 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 removing any dish, you need to know exactly how much it's costing you. Use this 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 that loss per portion by how often you're selling 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
Removing a dish means losing revenue. But this only hurts if guests walk out instead of ordering something else. In practice, 80-90% of customers choose an alternative from your menu.
Here's how to calculate the net effect:
- Revenue loss: Number of portions × Selling price
- Revenue retained: Revenue loss × 85% (average alternative selection rate)
- 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 battle. You need to add a profitable alternative in the same price range. This way you keep revenue while boosting margin. I've seen restaurants ignore this step — a mistake that costs the average restaurant EUR 200-400 per month in lost sales.
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, track if your calculations were accurate:
- 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 projections, 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
Run your loss calculations quarterly, not just once. Food costs fluctuate with seasons and suppliers — that profitable salmon dish might become a money-loser when prices spike 30% in winter.
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 exceeds 15%. Track for 2 months how many guests leave versus choose alternatives. Adjust your calculations based on actual data.
Can't I just increase the price instead?
You can, but test market acceptance first. A ribeye jumping from €38 to €45 might scare customers away. Try it as a daily special before making permanent changes.
How do I identify which dishes are loss-making?
Calculate food cost percentages for all dishes. Anything above 35-40% needs attention. Start with high-volume dishes that have poor margins — they're costing you the most.
Should I factor in fixed costs like rent and utilities?
No, not for this calculation. Fixed costs remain constant regardless. Focus on variable costs: ingredients, packaging, and any additional prep time required.
What about dishes that require specialty ingredients?
These often become loss-makers due to waste and spoilage. Calculate the true cost including unused portions that expire. Sometimes removing these dishes also reduces inventory complexity.
When is removing better than adjusting the recipe?
Remove dishes sold more than 4 times weekly that can't be fixed with simple recipe changes. High-volume losers drain your profits faster than occasional expensive items.
📚 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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