Your terrace is doing well, but is it making money? Many hospitality entrepreneurs don't know whether their terrace or indoor space is more profitable. By measuring both separately, you see where you can best focus your energy.
Why measuring separately matters
Your terrace and indoor space are actually two different businesses under one roof. They have different costs, different margins, and different seasons. By looking at them separately, you can make better 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
The first step is to figure out how much revenue each square meter generates. This gives you insight into the efficiency of your space.
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
Now it gets interesting. Which costs belong to which area? Some costs are shared, others are specific.
Direct costs per area:
- Food cost: link to your POS system or estimate based on dishes sold
- Staff: count hours for indoor vs. terrace service
- Terrace-specific: umbrellas, heating, winter storage
- Indoor-specific: air conditioning, lighting, sound system
⚠️ Note:
Kitchen costs are shared. Divide these based on revenue ratio, not floor area.
Gross profit margin per area
Subtract direct costs from revenue. This gives you the gross profit per area.
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
The terrace only runs 7 months, so also compare monthly performance.
Monthly gross profit:
- Terrace: €83,000 / 7 months = €11,857 per month
- Indoor: €110,600 / 12 months = €9,217 per month
Suddenly the terrace looks much better! Per active month, it generates more.
Factor in investments
Also consider the investments you've made in each area.
💡 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 has a much better return on investment.
Apply seasonal adjustment
For a fair comparison, you can 'project' the terrace to 12 months, or adjust indoor figures for terrace months.
If your terrace runs 7 of the 12 months, you can make the comparison based on the same period.
Make decisions based on data
With these figures, you can make better choices:
- Invest more in terrace (umbrellas, heating for longer season)?
- Expand terrace at the expense of indoor space?
- Different menu for terrace (higher margin)?
- Deploy staff differently in winter months?
⚠️ Note:
This calculation is a snapshot. Measure again each quarter, as seasons and costs change.
Digital support
Manually tracking these figures takes a lot of time. With a system like KitchenNmbrs, you can automatically track and compare revenue and costs per area.
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
Also track the average check size per area. Terrace guests often order differently than indoor guests - this can influence your menu and pricing strategy.
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 do I split kitchen costs between indoor and terrace?
Divide kitchen costs based on revenue ratio. If your terrace generates 36% of your revenue, allocate 36% of your kitchen costs to the terrace.
Should I include rent in this calculation?
For profitability comparison, you can exclude rent, as it usually applies to the entire property. Focus on costs you can influence per area.
What if my POS system can't split by area?
Estimate based on table occupancy. Track for one week how many guests sit indoors vs. on the terrace, and use that ratio for revenue split.
How often should I do this calculation?
At least quarterly, especially during seasonal changes. Your terrace profitability in July is different from October.
What if my terrace scores much better?
Consider investments in extending the terrace season (heating, canopy) or expanding terrace space at the expense of indoor area.
⚠️ EU Regulation 1169/2011 — Allergen Information — https://eur-lex.europa.eu/eli/reg/2011/1169/oj
The allergen information on this page is based on EU Regulation 1169/2011. Recipes and ingredients may vary by supplier. Always verify current allergen information with your supplier and communicate this correctly to your guests. KitchenNmbrs is not liable for allergic reactions.
In the UK, the FSA enforces allergen regulations under the Food Information Regulations 2014.
📚 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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