Most restaurant owners think delivery is a goldmine because they only count ingredient costs. The harsh truth? Without splitting shared kitchen expenses between your restaurant and delivery channels, you're making decisions with fantasy numbers. That delivery channel showing 45% margins might actually be breaking even once you factor in its fair share of rent, utilities, and labor costs.
Why cost allocation matters
Running both a restaurant and delivery from the same kitchen means both channels share certain expenses. Rent, utilities, your head chef's salary, cleaning costs—these exist regardless of how many delivery orders versus dine-in covers you serve.
Skip fair allocation and you'll get a warped view:
- Delivery appears way more profitable than reality
- Restaurant looks like it's bleeding money when it's actually breaking even
- You make terrible decisions about where to spend marketing dollars
⚠️ Watch out:
Too many operators only charge delivery for ingredients, packaging, and platform fees. Then delivery shows 40% margins while the restaurant looks unprofitable. That's fantasy math.
Which costs do you allocate?
Don't allocate everything—that's overkill. Sort your expenses into three buckets:
1. Channel-specific costs
- Restaurant: servers, dishwashers, table linens
- Delivery: packaging, platform commissions, delivery fees
2. Shared costs (split these)
- Kitchen rent and storage space
- Gas, water, electricity bills
- Head chef and prep cook wages
- Cleaning and sanitation
- Insurance premiums
- Food safety compliance
3. Fixed channel costs
- Restaurant: dining room rent, furniture depreciation
- Delivery: tablets, receipt printers, specialized equipment
Allocation methods that actually work
You need a fair way to split shared costs. Here are the most reliable approaches:
Method 1: Revenue percentage
Straightforward and works for most situations.
💡 Example:
Monthly sales: €50,000 total
- Restaurant: €30,000 (60%)
- Delivery: €20,000 (40%)
Shared expenses €8,000:
- Restaurant gets charged: €8,000 × 60% = €4,800
- Delivery gets charged: €8,000 × 40% = €3,200
Method 2: Order count basis
More accurate if your delivery orders are tiny compared to restaurant tickets.
💡 Example:
Monthly volume: 2,000 orders
- Restaurant: 800 tables (40%)
- Delivery: 1,200 orders (60%)
Shared expenses €8,000:
- Restaurant: €8,000 × 40% = €3,200
- Delivery: €8,000 × 60% = €4,800
Method 3: Kitchen time allocation
Most precise but tough to track. Only worth it if prep times vary dramatically between channels.
Making it work in practice
Start with revenue splits—you can always get fancier later. Based on real restaurant P&L data, operators who nail cost allocation see 15-20% swings in perceived channel profitability.
Monthly process:
- Total up restaurant and delivery sales
- Calculate each channel's percentage
- Split shared costs accordingly
- Run profitability by channel
💡 Full example breakdown:
Restaurant channel:
- Revenue: €30,000
- Food costs: €9,000 (30%)
- Service staff: €6,000
- Allocated shared costs: €4,800
- Profit: €30,000 - €9,000 - €6,000 - €4,800 = €10,200 (34%)
Delivery channel:
- Revenue: €20,000
- Food costs: €6,000 (30%)
- Packaging + platform fees: €4,000 (20%)
- Allocated shared costs: €3,200
- Profit: €20,000 - €6,000 - €4,000 - €3,200 = €6,800 (34%)
Red flags your model is broken
Healthy cost allocation produces realistic margins:
- Restaurant: 25-35% profit after all expenses
- Delivery: 20-30% profit after all expenses
- Both channels cover their fair share of fixed costs
- Neither channel looks suspiciously more profitable
⚠️ Watch out:
If delivery shows 45%+ margins, you're not allocating enough shared costs. If your restaurant looks unprofitable, your math doesn't add up somewhere.
Tools that make allocation easier
Excel works initially, but gets messy fast with multiple channels and locations. Systems that automate this include:
- Auto-calculating revenue percentages monthly
- Splitting shared costs automatically
- Displaying channel profitability dashboards
- Tracking allocation trends over time
This gives you instant visibility into how channel mix changes (more delivery, fewer dine-in covers) impact overall profitability.
How do you set up a cost allocation model? (step by step)
Categorize all costs
Make three lists: direct restaurant costs, direct delivery costs, and shared costs. Shared costs are everything you'd have anyway regardless of how you split channels.
Choose your allocation key
Start with revenue percentages per channel. Calculate monthly how much of your total revenue comes from restaurant versus delivery. This becomes your allocation key for shared costs.
Allocate and check
Apply the allocation key to your shared costs and calculate profitability per channel. Check if both channels show realistic margins (restaurant 25-35%, delivery 20-30%).
✨ Pro tip
Run your allocation model for 90 days using the 70/30 revenue split as your baseline, then adjust monthly based on actual performance. This prevents wild swings from skewing your cost planning during seasonal fluctuations.
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
Should I also allocate head chef costs across both channels?
Absolutely—your head chef cooks for both channels, so both should pay their fair share. Allocate based on revenue percentages or order volume, whichever makes more sense for your operation.
How often should I adjust my allocation keys?
Recalculate monthly using that month's actual revenue split. If your mix shifts dramatically (say from 60/40 to 40/60), adjust the allocation key starting the following month.
What if one channel becomes unprofitable after cost allocation?
At least you know the truth instead of operating on fake numbers. Analyze if you need to raise prices, cut costs, or potentially shut down that channel. Better than chasing phantom profits.
Can I use different allocation keys for different cost types?
Yes, and it can be more accurate—energy costs by kitchen usage, rent by square footage. But start simple with one key across all shared costs, then refine once you've got the basics down.
📚 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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