Renovation costs aren't ordinary expenses but investments you depreciate over multiple years. While many restaurant owners dump renovation costs straight onto their P&L, this creates misleadingly low profits. The right approach? Treat them as assets and spread costs over time.
Renovation as assets vs. direct costs
A renovation is an investment that delivers value to your restaurant for years ahead. That's exactly why it shouldn't hit your P&L all at once as a cost, but appear on your balance sheet as an asset instead.
💡 Example:
You renovate your restaurant for €50,000:
- New kitchen: €30,000
- New flooring: €15,000
- Painting: €5,000
This €50,000 does NOT go directly on your P&L, but on your balance sheet as an asset.
Which renovation costs are assets?
Not every renovation cost qualifies as an asset. The rules are straightforward:
- Assets: Investments that deliver value for more than 1 year
- Direct costs: Maintenance and repairs that simply restore original condition
💡 Example assets vs. costs:
Assets (on balance sheet):
- New kitchen equipment
- Expansion to larger terrace
- New flooring
- New sanitary fixtures
Direct costs (on P&L):
- Painting (same color)
- Repair broken tiles
- Replace broken faucet
Calculating depreciation
You depreciate assets over their economic useful life. This means spreading the costs across the number of years you'll benefit from them.
💡 Common depreciation periods in hospitality:
- Kitchen equipment: 5-10 years
- Furniture: 5-10 years
- Renovation/fit-out: 10-20 years
- Flooring: 10-15 years
- Sanitary fixtures: 10-15 years
Formula for annual depreciation:
Annual depreciation = Purchase cost / Number of years
💡 Calculation example:
Renovation €50,000, depreciated over 10 years:
- Annual depreciation: €50,000 / 10 = €5,000
- Monthly depreciation: €5,000 / 12 = €417
Each month €417 appears as depreciation costs on your P&L.
Impact on your P&L
By recording renovations correctly, you'll get a much more realistic picture of your monthly profit:
⚠️ Important:
Never dump an entire renovation onto your P&L all at once. That makes it appear like you had massive losses that month, when you've actually made an investment.
- Wrong: €50,000 renovation directly as costs → appears like you have a €50,000 loss
- Right: €417/month depreciation → realistic picture of monthly costs
Bookkeeping and administration
For your administration, you'll distinguish between different types of assets:
- Tangible fixed assets: Kitchen equipment, furniture
- Renovations: Fit-out, flooring, sanitary fixtures
- Installations: Air conditioning, lighting, sound systems
💡 Practical P&L example:
Monthly P&L after €50,000 renovation:
- Revenue: €25,000
- Food cost: €8,000 (32%)
- Personnel costs: €7,500
- Rent: €3,000
- Depreciation renovation: €417
- Other costs: €2,000
Profit: €4,083 (16.3%)
Based on real restaurant P&L data, operators who record renovations correctly show 15-25% higher reported monthly profits compared to those who expense everything immediately. Without proper depreciation, your profit would look dramatically lower due to the one-time renovation hit.
How do you record renovation costs as assets? (step by step)
Split renovation costs
Distinguish between assets (investments with value >1 year) and direct costs (maintenance/repairs). Assets go on the balance sheet, direct costs on the P&L.
Determine depreciation period
Choose a realistic period based on economic useful life. Kitchen equipment 5-10 years, renovations 10-20 years, furniture 5-10 years.
Calculate monthly depreciation
Divide total costs by number of years, then by 12 for the monthly amount. This amount appears on your P&L each month as depreciation costs.
✨ Pro tip
Track all renovation assets in a separate spreadsheet with purchase dates and 10-year depreciation schedules. Review this quarterly to identify which assets will be fully depreciated within 18 months.
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
Can I depreciate a €10,000 renovation all at once?
That depends on what it involves. Maintenance and repairs yes, but new equipment or structural renovations are investments you depreciate over multiple years.
How long can I depreciate a kitchen renovation?
A kitchen renovation typically gets depreciated over 10-15 years. Equipment might be shorter at 5-10 years, depending on how intensively you use it.
What if I borrowed money for the renovation?
The loan is completely separate from depreciation. You'll pay monthly interest and principal, but depreciate the asset according to its economic useful life.
Do I include VAT in the depreciation calculation?
No, if you can reclaim VAT, you only depreciate the amount excluding VAT. You claim the VAT back through your regular VAT return.
Can I change my depreciation schedule mid-way through?
Generally no, you must stay consistent once you start. Only in exceptional circumstances can you check with your accountant if an adjustment might be possible.
What happens if I sell equipment before it's fully depreciated?
You'll record either a gain or loss on disposal. If you sell for more than book value, that's a gain; less than book value creates a loss on your P&L.
📚 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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