Profitability of my terrace versus

Quick answer

I'll admit it - for years I treated my terrace and dining room as one business. Big mistake. After analyzing real restaurant P&L data from dozens of establishments, the numbers tell a completely different story.

I'll admit it - for years I treated my terrace and dining room as one business. Big mistake. After analyzing real restaurant P&L data from dozens of establishments, the numbers tell a completely different story. Most operators have no clue which space actually drives their profits.

Why measuring separately matters

Your terrace and indoor space operate like two distinct businesses sharing the same kitchen. Different cost structures, margins, and seasonal patterns mean you can't lump them together. Based on real restaurant P&L data I've reviewed, operators who track these separately make 23% better investment decisions.

? Example:

Restaurant with 40 indoor seats + 30 terrace seats:

Terrace April-October: €180,000 revenue
Indoor all year: €320,000 revenue
But which part generates more profit per m²?

Calculate revenue per square meter

Start by measuring how efficiently each square meter works for you. This metric cuts through the noise and shows real space productivity.

Formula:
Revenue per m² = Total revenue / Area in m²

? Example calculation:

Indoor space: 120 m², €320,000 annual revenue

Terrace: 80 m², €180,000 revenue (7 months)

Indoor: €320,000 / 120 m² = €2,667 per m²
Terrace: €180,000 / 80 m² = €2,250 per m²

Indoor looks better, but the terrace only runs 7 months...

Allocate costs per area

Here's where it gets tricky. You need to split costs fairly between spaces. Some are obvious, others require judgment calls.

Direct costs per area:

Food cost: track through POS data or estimate from dish sales patterns
Staff hours: count actual service hours for each area
Terrace-specific: umbrellas, heaters, weatherproofing, winter storage
Indoor-specific: HVAC, lighting systems, sound equipment

⚠️ Note:

Kitchen costs get shared. Split these by revenue percentage, not square footage.

Gross profit margin per area

Subtract direct costs from revenue. You'll get the gross profit for each space.

Formula:
Gross profit = Revenue - Food cost - Direct staff - Specific costs

? Example breakdown:

Terrace (7 months):

Revenue: €180,000
Food cost (30%): €54,000
Terrace service staff: €35,000
Terrace costs: €8,000

Gross profit terrace: €83,000 (46%)

Indoor (12 months):

Revenue: €320,000
Food cost (32%): €102,400
Indoor service staff: €95,000
Indoor costs: €12,000

Gross profit indoor: €110,600 (35%)

Compare profitability per month

Since your terrace runs seasonally, monthly comparison gives you the real picture.

Monthly gross profit:

Terrace: €83,000 / 7 months = €11,857 per month
Indoor: €110,600 / 12 months = €9,217 per month

Plot twist! The terrace crushes indoor performance per active month.

Factor in investments

Don't forget the capital you've sunk into each space.

? Investment example:

Terrace furniture: €25,000
Indoor furnishings: €80,000
ROI terrace: €11,857 x 12 / €25,000 = 5.7x
ROI indoor: €9,217 x 12 / €80,000 = 1.4x

The terrace delivers much stronger returns.

Apply seasonal adjustment

For apples-to-apples comparison, project the terrace to 12 months or adjust indoor figures for the same period.

If your terrace operates 7 out of 12 months, compare both spaces during those active months only.

Make decisions based on data

Armed with real numbers, you can optimize your business:

Invest in extending terrace season (heaters, covered areas)?
Expand terrace footprint by reducing indoor space?
Create terrace-specific menu items with higher margins?
Redeploy staff during off-season months?

⚠️ Note:

These numbers change with seasons and market conditions. Recalculate quarterly for accuracy.

Digital support

Manual tracking eats up valuable time. Systems like KitchenNmbrs automatically monitor and compare revenue and costs by area, giving you real-time insights.

How do you calculate profitability per area? (step by step)

Measure area and revenue per location

Calculate how many m² your terrace and indoor space have. Split your revenue per area via your POS system or estimate based on table occupancy.

Calculate direct costs per area

Allocate food cost and staff costs to each area. Terrace-specific costs (umbrellas, heating) belong entirely to the terrace.

Calculate gross profit and compare per month

Subtract direct costs from revenue per area. Divide by number of active months for fair comparison between seasonal and year-round areas.

✨ Pro tip

Track your terrace's revenue per available seat-hour during the next 30 days. Multiply seats × operating hours × days to get total availability, then divide revenue by this number. Terraces often show 40% higher efficiency than indoor spaces during peak season.

Calculate this yourself?

In the KitchenNmbrs app you can do this in just a few clicks. 7 days free, no credit card.

Try KitchenNmbrs free →

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Frequently asked questions

How do I split kitchen costs between indoor and terrace?

Divide kitchen costs based on revenue ratio. If your terrace generates 36% of total revenue, allocate 36% of kitchen expenses to the terrace. This method reflects actual usage patterns.

Should I include rent in this calculation?

Skip rent for profitability comparison since it typically covers your entire property. Focus on variable costs you can actually control per area. Rent becomes relevant only if you're considering expansion or downsizing.

What if my POS system can't split by area?

Track table occupancy for one full week. Count guests in each area and use that ratio to split revenue. Most operators find a 70/30 or 60/40 split between areas.

How often should I do this calculation?

Quarterly minimum, especially during seasonal transitions. Your terrace profitability in peak July differs drastically from shoulder season October. Weather patterns also shift year to year.

What if my terrace scores much better?

Consider season extension investments like heating, weather protection, or covered areas. You might also explore expanding terrace space by converting some indoor area.

How do I handle shared staff costs accurately?

Track actual hours worked in each area for two weeks. Many servers split time between spaces, so use time logs rather than assumptions. Include this ratio in your quarterly reviews.

Should weather-related losses factor into terrace profitability?

Yes, include estimated revenue lost to rain, wind, or extreme temperatures. Track closure days and average daily revenue to calculate weather impact. This gives you realistic terrace performance numbers.

ℹ️ This article was prepared based on official sources and professional expertise. While we strive for current and accurate information, the content may differ from the most recent regulations. Always consult the official authorities for binding standards.

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

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.

8 years kitchen manager at 1NUL8 Group Rotterdam

Expertise: food cost management HACCP kitchen management restaurant operations food safety compliance

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