Discount promotions can boost your revenue, but also wipe out your profit. Many restaurants offer 20% discounts without calculating how much extra they need to sell to break even. The math is trickier than most owners realize.
Why discount promotions are often unprofitable
A 20% discount doesn't mean you need to sell 20% more to break even. Because of your fixed costs, you often need 40% to 60% more revenue to earn the same amount.
⚠️ Heads up:
Many business owners think: "20% discount = 20% more sales". This is wrong. You usually need 2 to 3 times as much additional revenue.
The formula for minimum sales threshold
To calculate how much additional revenue you need with a discount, use this formula:
Additional revenue needed = (Discount % / Net profit margin %) × Current revenue
Your net profit margin is what remains after all costs (food, staff, rent, energy, etc.).
💡 Example:
Your restaurant has a net profit margin of 8% and you're offering 20% discount on everything.
- Normal monthly revenue: €50,000
- Discount: 20%
- Net profit margin: 8%
Calculation: (20% / 8%) × €50,000 = 2.5 × €50,000 = €125,000
You need €75,000 EXTRA revenue (150% more than normal) to break even.
Different scenarios by profit margin
The lower your profit margin, the more additional revenue you need:
- At 15% profit margin: 20% discount = 33% extra revenue needed
- At 10% profit margin: 20% discount = 100% extra revenue needed
- At 5% profit margin: 20% discount = 300% extra revenue needed
- At 3% profit margin: 20% discount = 567% extra revenue needed
💡 Example with low profit margin:
A pizzeria with 5% net profit margin offers 25% discount.
- Normal weekly revenue: €8,000
- Extra revenue needed: (25% / 5%) × €8,000 = €40,000
They need to sell 5 times as much to earn the same. Practically impossible.
Alternative approach: selective discounts
Instead of discounting everything, offer discounts on dishes with high profit margins. This is the kind of thing you only learn after closing your first month at a loss:
- Check which dishes have food cost below 25%
- Offer 15-20% discount on those dishes
- Keep dishes with high food cost (35%+) at regular price
- Promote the discounted dishes extra
💡 Example selective discount:
A bistro offers discount only on pastas (food cost 22%) and keeps meat at regular price (food cost 38%).
- Pasta regular price: €16.50 (margin €12.87)
- Pasta with 20% discount: €13.20 (margin €9.57)
- Still €9.57 profit per pasta vs. €0 on discounted meat
How food cost calculators help with this
With a food cost calculator you can see the profit margin per dish directly and calculate which discounts are feasible. The app automatically shows your food cost percentages, so you know which dishes are suitable for discount promotions.
How do you calculate the minimum sales threshold? (step by step)
Determine your net profit margin
Subtract all your costs from your monthly revenue (food, staff, rent, energy, etc.). Divide the result by your revenue and multiply by 100 to get the percentage. This is your net profit margin.
Calculate the revenue increase
Divide the discount percentage by your net profit margin. This number shows how many times your current revenue you need. For example: 20% discount / 8% profit margin = 2.5 times your normal revenue.
Check if this is realistic
If you need more than 50% extra revenue, consider selective discounts on only profitable dishes. Check which dishes have food cost below 30% and offer discounts on those.
✨ Pro tip
Calculate your break-even threshold for your top 5 highest-margin dishes within the next 48 hours. Most owners discover they can safely discount appetizers but should never touch main courses.
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 just offer 20% discount and sell 20% more?
No, this only works if your net profit margin is 20%. With an 8% profit margin, you need 150% more revenue to break even.
What if I don't know my exact profit margin?
Estimate conservatively. Many restaurants have 5-12% net profit margin. Calculate with 8% and you're on the safe side.
Is it better to offer discounts on beverages?
Beverages often have higher profit margins (60-80%), so you can more easily offer discounts there. Note: alcohol is subject to 21% VAT.
How do I know which dishes are suitable for discounts?
Dishes with food cost below 28% can usually handle discounts. Check this per dish before you plan discount promotions.
What if my competitor is also offering discounts?
Focus on added value instead of price. For example: free appetizer with main course, instead of 20% discount on everything.
Should I calculate break-even daily or weekly during promotions?
Track daily for the first 72 hours to catch problems early. Most promotions show their true impact within the first 3 days of launch.
📚 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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