73% of upscale restaurants use round pricing despite losing 2-8% margin per dish. Many choose round prices (€25 instead of €24.50) for a more luxurious look, but never calculate if it actually pays off. The math determines whether premium pricing boosts your bottom line.
What is premium pricing?
Premium pricing means deliberately asking a higher price because your business is perceived as more luxurious or exclusive. Think of:
- Round prices (€30 instead of €28.50)
- Higher prices due to location (city center vs. suburbs)
- More luxurious appearance, service or ambiance
- Exclusive ingredients or preparation methods
It only works if guests actually experience the added value. Otherwise you're losing customers for no reason.
Calculate your current margin per dish
Before you consider premium pricing, you need to know how much you're currently making per dish.
💡 Example current situation:
Current steak price: €28.50 incl. 9% VAT
- Selling price excl. VAT: €28.50 / 1.09 = €26.15
- Ingredient costs: €9.20
- Food cost: (€9.20 / €26.15) × 100 = 35.2%
- Margin per portion: €26.15 - €9.20 = €16.95
At 80 portions/week = €1,356 margin per week
This margin becomes your baseline. Premium pricing should increase this margin, even with potentially lower sales.
Calculate the impact of a higher price
Premium pricing creates two effects: higher margin per portion, but often lower sales volume. You must factor in both.
💡 Example premium scenario:
Premium price: €35.00 incl. 9% VAT
- Selling price excl. VAT: €35.00 / 1.09 = €32.11
- Ingredient costs: €9.20 (same)
- New margin per portion: €32.11 - €9.20 = €22.91
- Difference: €22.91 - €16.95 = €5.96 extra per portion
But: expect 15% lower sales = 68 portions/week
New total margin: 68 × €22.91 = €1,558/week
Here, premium pricing generates an extra €202 weekly, despite selling 12 fewer portions.
The break-even calculation
You can calculate exactly how much sales volume you can lose before premium pricing becomes unprofitable.
Formula:
Break-even portions = (Current total margin) / (New margin per portion)
💡 Break-even calculation:
- Current total margin: €1,356/week
- New margin per portion: €22.91
- Break-even: €1,356 / €22.91 = 59 portions
You can lose a maximum of 21 portions (26%)
As long as your sales drop stays under 26%, you'll earn more with premium pricing. Based on real restaurant P&L data, most establishments see 10-20% volume drops with 15-25% price increases.
⚠️ Note:
Test premium pricing first on select dishes. Don't overhaul your entire menu simultaneously. This allows you to measure actual sales impact.
Factors that support premium pricing
Premium pricing works better under certain conditions:
- Location: City center, tourist areas, business district
- Competition: Few comparable businesses nearby
- Target audience: Business guests, special occasions
- Unique value: Exclusive ingredients, special location
- Service level: Higher service, more luxurious appearance
The more factors you have, the greater your pricing flexibility becomes.
Test and measure results
Start with a 4-6 week test period on your top-selling dishes:
- Track sales numbers per dish before and after
- Calculate total margin weekly
- Monitor customer reactions and reviews
- Check if other dishes sell more or less
Tools like KitchenNmbrs help track these numbers without manual counting.
How do you calculate whether premium pricing is worth it? (step by step)
Calculate current margin per portion
Take your selling price excl. VAT minus ingredient costs. Also count how many portions you sell per week. This is your baseline for comparison.
Set new price and calculate new margin
Choose your desired premium price and calculate the new margin per portion. Estimate how much less you'll likely sell (usually 10-20%).
Calculate break-even point
Divide your current total margin by the new margin per portion. This gives you the minimum number of portions you need to sell to break even.
Test for 4-6 weeks and measure results
Start with a few dishes and measure sales numbers. Compare total margin before and after. Adjust based on results.
✨ Pro tip
Test round pricing increases of €2-5 on your top 3 dishes during a 6-week trial period. Track if total weekly margin increases despite 10-20% volume drops.
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 much higher can I make my prices without losing customers?
This depends on your location and target audience. In premium settings you can often go 15-25% higher, in regular neighborhoods usually a maximum of 10%. Always test first on select dishes.
What if my sales drop by more than 30% due to higher prices?
Then premium pricing is probably too aggressive. Revert to the old price or choose a middle option. Sometimes it helps to improve the experience first before raising prices.
How do I know if my business suits premium pricing?
Look at your location, competition and current customer type. If you have many business guests, are located in the city center or serve unique dishes, your chances are better than in regular neighborhood locations.
Can I use round prices without losing too much margin?
Yes, if your food cost stays below 30% you have room for round prices. Always calculate whether the higher price increases your total margin, even with slightly lower sales.
📚 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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