Your average margin determines if a dish is profitable enough. Many restaurants have dishes that perform far below their average, causing them to lose money without knowing it. Here's how to calculate if each dish meets your profit targets.
What is your average margin?
Your average margin represents the profit percentage you earn across all dishes combined. It reveals what's left after subtracting ingredient costs from revenue.
? Example calculation average margin:
Restaurant with 30% average food cost:
- Selling price: €100 (excl. VAT)
- Ingredient costs: €30
- Margin: €70
Average margin: 70%
Calculate the margin per dish
For each dish, use this formula: Margin % = 100% - Food cost %
A 25% food cost equals a 75% margin. A 35% food cost equals a 65% margin. Simple math, but powerful insights.
? Example comparison:
Pasta Carbonara vs. Steak:
- Pasta: 22% food cost = 78% margin (above average)
- Steak: 38% food cost = 62% margin (below average)
- Average restaurant: 70% margin
The pasta performs +8% better, the steak -8% worse.
Interpret the results
Dishes falling below your average margin aren't pulling their weight. Several factors create this problem:
- Expensive ingredients: Premium products without premium pricing
- Generous portions: Chef gives more than calculated
- Outdated prices: Purchasing costs increased, selling price didn't follow
- Excessive waste: More waste than expected during prep
Based on real restaurant P&L data, establishments typically find 40% of their dishes underperform their target margins by 3-8 percentage points.
⚠️ Note:
A dish with 5% lower margin costs you €50 per percentage point at 1000 portions per year. That's €250 less profit on a single dish.
Take action on poor margins
For dishes below your average, you've got three paths forward:
- Raise the price: Most direct solution
- Lower costs: Cheaper ingredients or smaller portions
- Remove from menu: If the dish isn't popular
? Example action plan:
Steak with 62% margin (average: 70%):
- Option 1: Price from €32 to €35 (+9%)
- Option 2: Portion from 250g to 220g (-12%)
- Option 3: Use cheaper cut (-15% purchasing)
All options bring the margin to ~70%
Menu engineering matrix
Combine popularity with margin performance for smarter decisions:
- Popular + high margin: Promote and highlight
- Popular + low margin: Raise price or lower costs
- Unpopular + high margin: More marketing, better position on menu
- Unpopular + low margin: Remove from menu
How do you calculate if a dish is above or below your average margin?
Calculate your average food cost percentage
Add up all ingredient costs from a week and divide by your total revenue excl. VAT. This gives you your average food cost. Your average margin is 100% minus this percentage.
Calculate the food cost per individual dish
Add up all ingredient costs of the dish and divide by the selling price excl. VAT. Multiply by 100 for the percentage. The margin is 100% minus the food cost.
Compare and categorize your dishes
Compare the margin of each dish with your average. Dishes above the average perform well, dishes below need attention for price adjustment or cost reduction.
✨ Pro tip
Analyze your 8 best-selling dishes over the past 6 weeks first. If those all hit above-average margins, you've fixed 75% of your profit leaks.
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
What is a good average margin for restaurants?
Should I remove low-margin dishes from the menu immediately?
How often should I check my margins?
Can I compensate low-margin dishes with high-margin dishes?
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
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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