Why do some restaurants thrive while others struggle with identical sales numbers? The answer often lies in one overlooked metric: fixed costs as a percentage of revenue. Most owners track their monthly bills but never calculate what slice of their income disappears before they even buy ingredients or pay staff.
What exactly are fixed costs?
Fixed costs hit your bank account every month like clockwork. Doesn't matter if you're packed to capacity or serving three customers all day - these expenses stay the same.
- Rent or mortgage payments for your location
- Insurance policies (liability, property, inventory coverage)
- Utilities (electricity, gas, water - baseline usage)
- Communication services (phone, internet)
- Professional services (accounting, legal)
- Software subscriptions and licenses
- Equipment depreciation
- Loan payments and interest
⚠️ Note:
Staff wages aren't fixed costs, despite being monthly expenses. These fluctuate based on your operating hours and service levels.
The formula for fixed costs percentage
The math couldn't be simpler, but getting accurate numbers matters:
Fixed costs % = (Monthly fixed costs total / Monthly revenue excluding VAT) × 100
💡 Example:
Local bistro pulling in €45,000 monthly (VAT excluded):
- Location rent: €4,500
- Insurance premiums: €650
- Utility bills: €800
- Additional fixed expenses: €1,050
Total fixed costs: €7,000
Math: (€7,000 / €45,000) × 100 = 15.6%
What counts as healthy?
Your target percentage depends on your restaurant type. But these ranges give you solid targets to aim for:
- Full-service restaurants: 15-25% of revenue
- Coffee shops and cafés: 20-30% of revenue
- Fast-casual dining: 12-20% of revenue
- Delivery and takeout: 10-18% of revenue
💡 Real example:
Family restaurant doing €30,000 monthly with €6,000 in fixed expenses:
Result: (€6,000 / €30,000) × 100 = 20%
Perfect fit within the 15-25% sweet spot for restaurants.
Why this number makes or breaks you
Your fixed cost ratio controls how much money's left for food, wages, and profit. Heavy fixed costs crush restaurants faster than bad reviews - a pattern we see repeatedly in restaurant financials where owners discover too late that rent alone devours 40% of their revenue.
⚠️ Note:
Runaway rent kills more restaurants than any other factor. Run these numbers before you sign that lease, not after you're already bleeding money.
What to do if your percentage is too high
Numbers above 30% mean you're in trouble. You've got three ways out:
- Pump up revenue: Get more customers through the door, tweak your pricing, stay open longer
- Slash fixed costs: Renegotiate rent, hunt for cheaper insurance, switch utility providers
- Find cheaper space: Move to lower-rent premises (think hard about this one)
💡 Recovery example:
Starting disaster: 32% fixed costs
Revenue boost from €25,000 to €30,000 monthly:
New ratio: (€8,000 / €30,000) × 100 = 26.7%
Result: Moved from danger zone to manageable territory
Staying on top of your numbers
Food cost calculators can automatically track fixed expenses and calculate percentages against your revenue. You get instant alerts if ratios creep too high and clear visibility into one of your most critical financial health indicators. No more guessing - you'll know exactly where you stand every month.
How do you calculate fixed costs percentage? (step by step)
Gather all fixed costs from last month
Go through your bank statements and add up all costs you would have, even if you were closed for a month. Think of rent, insurance, energy, phone, software subscriptions, and loans.
Calculate your monthly revenue excluding VAT
Get your revenue figures from the same month and convert to excluding VAT. At 9% VAT divide by 1.09. So €50,000 incl. VAT becomes €45,872 excl. VAT.
Divide fixed costs by revenue and multiply by 100
Use the formula: (Fixed costs / Revenue excl. VAT) × 100. For example: (€8,000 / €40,000) × 100 = 20%. Check if this falls within the healthy range for your type of business.
✨ Pro tip
Run this calculation using your weakest 3-month period from last year. If your fixed costs stayed under 27% during those tough months, your business model can handle almost any challenge.
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 revenue for this calculation?
Never include VAT in your revenue calculations. That money belongs to the tax office, not your business. Divide your VAT-inclusive revenue by 1.09 to get your actual revenue figure for the calculation.
Are personnel costs fixed costs?
No, personnel costs are variable expenses that change based on your operating schedule and business volume. Keep them completely separate from your fixed cost calculations.
What if my percentage comes out above 30%?
You're in serious danger territory. Focus immediately on boosting revenue through more customers or strategic price increases. If that's not possible, you need to cut fixed costs fast or consider relocating to cheaper premises.
How often should I recalculate this percentage?
Calculate monthly, but pay special attention to your slowest quarter. If you can stay under 28% during your worst three months, you'll survive any seasonal dip or economic downturn.
📚 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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