Are you making your restaurant's first-year profits look worse than they actually are? Many entrepreneurs book catering licenses and fees as direct losses, which unnecessarily burdens their results. You should depreciate these one-time costs over multiple years instead.
What are catering licenses and fees?
Catering licenses are the official permits you need to operate a catering business. The associated fees are the costs you pay to the municipality for processing your application.
- Catering license: €500 - €2,500 (depending on municipality and type of business)
- Alcohol and catering license: €300 - €1,500
- Terrace license: €200 - €800 per year
- Possible modifications/expansions: €150 - €500
Why not book it directly?
A catering license is usually valid indefinitely, as long as you meet the requirements. If you book €2,000 in licenses directly in year 1, it looks like your business is performing much worse than it actually is.
⚠️ Note:
Terrace licenses are often annual. You DO book these directly in the year you pay them.
Depreciation over multiple years
Most catering licenses are depreciated over 5 to 10 years. This approach is one of the most common blind spots in kitchen management - owners don't realize how much it skews their year-one performance metrics. But it gives a much more realistic picture of your annual costs.
💡 Example depreciation over 5 years:
Total license costs at opening: €3,200
- Catering license: €1,500
- Alcohol and catering license: €800
- Music license: €400
- Miscellaneous fees: €500
Annual depreciation: €3,200 / 5 = €640 per year
Booking in your administration
You book the license costs in two steps:
- Upon payment: From bank account to 'Intangible fixed assets' (balance sheet)
- Each year: From assets to 'License depreciation costs' (P&L)
On your P&L you'll then see a fixed amount for license costs each year, instead of a large spike in the first year.
💡 Example P&L line:
Years 1 through 5 on your P&L:
- License depreciation: €640
- Terrace license (annual): €400
- Total license costs per year: €1,040
Expansion or renewal
You expand your license (for example, more seating) or renew it? Treat this as a new investment. You depreciate the additional costs over 5-10 years again.
⚠️ Note:
Fines for violations (late payment, non-compliance with regulations) are NOT depreciable costs. You book these directly as 'extraordinary expenses'.
Impact on your figures
By correctly depreciating licenses, you get a more honest picture of your annual results. This helps with:
- Comparing years with each other
- Determining realistic profit margins
- Conversations with banks or investors
- Budgeting for coming years
💡 Example impact:
Restaurant with €300,000 annual revenue:
- Direct booking €3,200: appears to cost 1.1% of revenue in year 1
- Depreciation €640/year: realistic 0.2% of revenue per year
Difference: 0.9% better profit margin through correct booking
How do you process license costs? (step by step)
Inventory all license costs
Collect all invoices from the municipality and other authorities for catering license, alcohol and catering license, music license and any other licenses. Add up the total amount you paid as a one-time cost.
Determine the depreciation period
Choose 5 years for smaller amounts (up to €5,000) or 10 years for higher amounts. Annual licenses such as terrace licenses you do not depreciate but book directly in the year you pay them.
Calculate annual depreciation
Divide the total amount by the number of years. You book this amount each year from your balance sheet (assets) to your P&L (depreciation costs). This way you spread the costs fairly over the period you benefit from the licenses.
✨ Pro tip
Track license renewal dates 18 months in advance and set aside €53 monthly (€640/12) in a separate account. This prevents cash flow surprises and ensures you're always prepared for both renewals and depreciation payments.
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 depreciate license costs or book them directly?
One-time licenses (catering license, alcohol and catering license) you depreciate over 5-10 years. Annual costs such as terrace licenses you book directly in the year you pay them.
Over how many years do I depreciate license costs?
Usually 5 years for smaller amounts (up to €5,000) or 10 years for higher amounts. Choose a period that fits how long you expect to benefit from the license.
What if I expand or renew my license?
Additional costs for expansion or renewal you treat as a new investment. You depreciate these over 5-10 years again, separate from your original license costs.
Where do I book the depreciation on my P&L?
Create a separate line 'License depreciation' under your operating costs. This way you see each year how much you spend on maintaining your licenses.
Do fines also count as license costs?
No, fines for violations are not depreciable costs. You book these directly as 'extraordinary expenses' in the year you pay them.
Can I change my depreciation period after I've started?
Yes, but you'll need to justify the change to your accountant and tax authority. Most commonly happens when you discover the license has a shorter validity period than expected.
What happens to undepreciated license costs if I sell my restaurant?
The remaining book value transfers to the new owner as part of the business sale. Alternatively, you can write off the remaining amount as a loss in your final year.
📚 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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