Ever wonder exactly how much of each euro you earn actually stays in your pocket? Your operating costs as a percentage of revenue reveal how much goes to fixed and variable costs versus profit. Most restaurant owners can't answer this question, leaving them blind to their true profitability.
What are operating costs?
Operating costs encompass all expenses you incur running your restaurant, minus taxes and financing costs. They break down into two categories:
- Variable costs: food cost, beverage costs, packaging materials
- Fixed costs: rent, staff, energy, insurance, depreciation
Calculating these as a revenue percentage instantly shows your profit margin potential.
The formula
The calculation's straightforward but reveals everything:
💡 Formula:
Operating costs % = (Total operating costs / Revenue excl. VAT) × 100
Always use revenue excluding VAT. That VAT you collect? It goes straight to tax authorities.
Which costs do you include?
Every expense directly tied to business operations:
- Food cost: ingredients, beverages
- Staff costs: wages, social contributions, pension premiums
- Housing costs: rent, energy, water, maintenance
- Other operational costs: marketing, insurance, administration, depreciation
⚠️ Important:
Taxes (corporate tax, income tax) and financing costs (interest on loans) don't count as operating costs.
Calculation example
💡 Example restaurant (per month):
March revenue: €85,000 incl. VAT → €77,982 excl. VAT
- Food cost: €23,400 (30%)
- Staff costs: €31,200 (40%)
- Rent: €7,800 (10%)
- Energy: €3,120 (4%)
- Other costs: €6,240 (8%)
Total operating costs: €71,760
Operating costs %: (€71,760 / €77,982) × 100 = 92%
This restaurant's left with just 8% for profit, taxes and financing. That's cutting it close.
What are typical percentages?
Operating costs differ by restaurant concept:
- Fine dining: 85-95% (high staff costs)
- Casual dining: 80-90%
- Fast casual: 75-85% (lower staff costs)
- Delivery only: 70-80% (no restaurant rent, but platform fees)
Above 95%? You're likely bleeding money. Below 75%? Excellent territory. From analyzing actual purchasing data across different restaurant types, these ranges hold true regardless of location or size.
Monthly vs. annual measurement
Track this KPI monthly and yearly:
💡 Why both?
- Per month: spot trends and seasonal shifts
- Per year: reveals the complete picture (balances slow/busy periods)
A rough quarter can balance out with peak season. But only if you're watching the numbers.
Where things often go wrong
Common calculation mistakes include:
- Forgetting VAT: using revenue incl. VAT (makes percentage appear lower)
- Missing costs: counting only major expenses
- Personal expenses: blending business and personal costs
- One-time costs: adding large investments to regular monthly totals
⚠️ Important:
One-time investments (new oven, renovation) don't belong in monthly operating costs. Depreciate those over multiple years instead.
How do you improve this percentage?
If operating costs run too high, you've got three moves:
- Boost revenue: more guests, higher average bill
- Cut costs: smarter purchasing, waste reduction
- Optimize mix: push profitable dishes
Target your biggest expenses first: food cost and staff. Trimming 2% from each can save €1,000+ monthly. Tools like a food cost calculator can help identify these opportunities quickly.
How do you calculate operating costs % step by step?
Gather all costs from last month
Add up all expenses: food cost, staff, rent, energy, insurance, marketing, maintenance. Use your accounting records or bank statements. Don't forget small items like phone or administration costs.
Calculate your revenue excluding VAT
Take your revenue figure from last month and subtract the VAT. At 9% VAT: divide by 1.09. For example €50,000 incl. VAT becomes €45,872 excl. VAT.
Divide costs by revenue and multiply by 100
Use the formula: (Total costs / Revenue excl. VAT) × 100. For example: (€40,000 / €45,872) × 100 = 87.2%. This is your operating costs percentage.
✨ Pro tip
Calculate your operating costs percentage on the 5th of each month for the previous month. This 30-day delay ensures all invoices are in, giving you accurate data to course-correct before problems compound.
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 include VAT in my calculation?
No, always use revenue excluding VAT. The VAT you collect goes directly to tax authorities - it's not real revenue for your business.
Do I include depreciation in operating costs?
Yes, depreciation on equipment and inventory counts as operating costs. However, don't include one-time large investments directly - depreciate those over several years. This smooths out your monthly calculations and gives a more accurate picture.
What if my percentage is too high?
Focus on your biggest cost drivers: food cost and staff wages. A 2% reduction in both can save over €1,000 monthly for most restaurants. You can also boost revenue through better marketing or menu optimization.
📚 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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