Why do some restaurants thrive while others struggle, even with similar revenue numbers? The answer often lies in understanding which services actually make money. Most operators only look at total figures, missing that their lunch runs at a loss while dinner generates solid profits.
What is margin per service?
Margin per service shows the actual profit from lunch, dinner, catering or other services after removing all direct costs. Unlike total margin calculations, you're splitting costs and revenues by individual service.
Picture this scenario: you're pulling €50,000 monthly with 12% net margin. Looks decent, right? But what if lunch delivers just 2% margin while dinner hits 22%? You could restructure lunch or eliminate it entirely, then double down on dinner service.
Identify direct costs per service
Different services carry different cost structures. Break them down like this:
- Direct food cost: Ingredients used specifically for that service
- Direct labor: Staff working only for that service
- Service-specific costs: Delivery costs, special packaging, music license
💡 Example:
Restaurant with lunch and dinner service:
- Lunch: simple dishes, 1 chef, paper tableware
- Dinner: complex dishes, 2 chefs + sous chef, porcelain
- Both: same rent, but different food cost and labor
Allocate indirect costs
Certain expenses hit all services: rent, insurance, utilities. You'll need to distribute these using a logical allocation method.
Common allocation approaches:
One of the most common blind spots in kitchen management is inconsistent cost allocation. Operators switch between revenue-based and time-based splits mid-year, making comparisons worthless.
- By revenue: Service generating 60% of sales absorbs 60% of indirect costs
- By operating hours: Lunch runs 6 hours, dinner runs 6 hours = 50/50 split
- By space usage: Different services operate in different areas
⚠️ Note:
Pick one allocation method and stick with it. Changing approaches destroys your ability to track trends over time.
Calculation step by step
For each service, you'll calculate:
Gross margin per service =
(Service revenue - Direct food cost - Direct labor - Service costs)
Net margin per service =
(Gross margin - Share of indirect costs)
💡 Calculation example:
Lunch service in March:
- Revenue: €15,000
- Direct food cost: €4,500 (30%)
- Direct labor: €3,600 (24%)
- Share of indirect costs: €4,200 (28%)
Net margin lunch: €15,000 - €4,500 - €3,600 - €4,200 = €2,700 (18%)
What do you do with the results?
Once you've got margin data per service, you can make targeted moves:
- Low margin service: Bump prices, cut costs, or discontinue
- High margin service: Push harder marketing, expand hours, add capacity
- Loss-making service: Examine whether it provides strategic value
💡 Decision example:
After calculation it turns out:
- Lunch: 8% net margin
- Dinner: 24% net margin
- Catering: 35% net margin
Action: Overhaul lunch menu (food costs killing you), chase more catering contracts.
Track digitally
Manual calculations eat up serious time. Digital systems automatically calculate food cost per dish and track revenue by service. You'll instantly spot which services actually drive profits.
How do you calculate margin per service? (step by step)
Split revenue per service
Record for each service (lunch, dinner, catering) the revenue from last month. Use your POS system or count manually per service.
Calculate direct costs per service
Add up: food cost ingredients + labor specific to that service + service-specific costs (packaging, delivery). These are costs that disappear if you stop that service.
Allocate indirect costs
Distribute rent, insurance, energy across your services. Use revenue ratio as allocation key: service with 40% revenue gets 40% of indirect costs.
Calculate net margin
Per service: Revenue - Direct costs - Share of indirect costs = Net margin. Convert to percentage by dividing by revenue × 100.
✨ Pro tip
Start by analyzing your 2 highest-revenue services over the past 90 days. These typically represent 70-80% of your total profit, so getting them right matters most.
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
How often should I calculate margin per service?
Monthly minimum for reliable insights. Major changes like menu updates or price adjustments? Recalculate immediately to measure impact.
What if a service runs at a loss but attracts customers?
That service might have strategic value. Calculate how much those customers spend on profitable services. A loss-making lunch could be worth it if guests return for profitable dinners.
Can I split labor costs when staff works multiple services?
Absolutely. Allocate based on time spent. If your chef dedicates 60% of hours to lunch and 40% to dinner, split their salary accordingly.
What margin percentages should I target per service?
Lunch typically runs 8-15% due to lower price points, dinner hits 15-25%, catering can reach 25-40% thanks to premium pricing and efficiency. Compare against your own historical data first.
Should VAT be included in these calculations?
Never include VAT. Calculate everything excluding VAT since your revenue and costs are VAT-exclusive, ensuring ratios align with your purchasing data.
How do I handle seasonal menu items in margin calculations?
Track seasonal items separately during their active periods, then blend the data. A summer patio service might show 30% margins for four months, then zero for eight months.
What's the minimum revenue threshold to justify a separate service?
Generally, a service should generate at least 15% of total revenue to warrant separate tracking. Smaller services can be grouped under 'other' until they grow larger.
📚 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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