Tiered discounts from suppliers can make your purchases much cheaper, but the calculation is often confusing. Many restaurant owners don't know exactly how much they're really paying after all discounts. You'll learn step-by-step how to calculate the true net price after tiered discounts.
What are tiered discounts?
Tiered discounts are discounts that increase the more you buy. The more you order, the higher the discount percentage. Suppliers use this to encourage you to place larger orders.
💡 Example tiered discount:
- 0-100 kg: 0% discount
- 101-250 kg: 5% discount
- 251-500 kg: 8% discount
- 500+ kg: 12% discount
The basic formula for net price
The formula is straightforward, but you need to be careful with the order of calculation:
Net price = Gross price × (1 - Discount percentage/100)
With multiple discounts, you calculate them one by one, not added together.
⚠️ Watch out:
Never add discount percentages together. A tiered discount of 5% + payment discount of 2% is NOT 7% discount on the gross price!
Step-by-step plan for complex discounts
With suppliers, you often have multiple types of discounts at the same time:
- Tiered discount - depending on order size
- Payment discount - when paying within X days
- Volume discount - when purchasing a specific product quantity
- Seasonal discount - temporary promotions
From years of working in professional kitchens, I've learned you apply each discount to the amount remaining after the previous discount.
💡 Example calculation:
Order: 300 kg vegetables at €2.50/kg = €750 gross
- Tiered discount 8% (251-500 kg): €750 × 0.92 = €690
- Payment discount 2% (within 10 days): €690 × 0.98 = €676.20
Net price: €676.20 (€2.25/kg)
Why this matters for your food cost
If you calculate your food costs using your supplier's gross price, you're underpricing yourself. You're entitled to those discounts, so use them in your calculations too.
The difference can be significant. In the example above, it's €0.25 per kilo. At 300 kg per month, that's €900 per year in "hidden" profit.
💡 Impact on food cost:
Dish with €8 ingredients, selling price €28 (€25.69 excl. VAT)
- Gross price: €8.00 / €25.69 = 31.1% food cost
- Net price after 10% discount: €7.20 / €25.69 = 28.0% food cost
Difference: 3.1 percentage points more margin!
How do you keep track of this?
Many entrepreneurs forget to factor in their discounts in their food costs. They work with the gross price and are surprised that their actual profit is higher than calculated.
Better to calculate your real net prices once a month and enter them in your system. Then your food cost calculation matches reality.
How do you calculate the net price after a tiered discount? (step by step)
Check which tier your order falls into
Look at the total order weight or amount and find which tiered discount applies. Note: some suppliers calculate per product group, others across the entire order.
Calculate the price after tiered discount
Multiply the gross price by (1 - discount percentage/100). At 8% discount: gross price × 0.92. This gives you the price after the first discount.
Apply any additional discounts
Do you have other discounts (payment, volume, seasonal)? Apply those to the amount after the tiered discount. Each discount is calculated on what remains after the previous discount.
✨ Pro tip
Calculate your top 3 suppliers' net prices every 2 weeks and update your inventory costs immediately. This single habit can reveal 1-3% hidden margin you didn't know existed.
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 add discount percentages together?
No, never. Each discount is calculated on the amount remaining after the previous discount. 5% + 2% discount is not 7%, but 6.9% total discount.
How often should I update my net prices?
At least once a month, or whenever your supplier changes their prices or discount structure. Otherwise your food cost calculation won't be accurate anymore.
What if I'm just below a tiered threshold?
Calculate whether it's worth ordering a bit more to get the higher discount. But watch out for shelf life and storage costs - not everything needs to become inventory.
Does the tiered discount apply per order or per month?
This varies by supplier. Some calculate per order, others per month or quarter. Check this in your supplier contract.
How do I factor this into my food cost?
Always use the net price (after all discounts) in your food cost calculation. Only then will your food cost percentage match reality.
What happens if I get a retroactive discount at year-end?
Some suppliers offer additional discounts based on annual volume. Track these carefully and adjust your cost calculations quarterly to avoid surprises.
Should I negotiate tiered thresholds with my supplier?
Absolutely. If you're consistently hitting 480kg but the next tier starts at 500kg, ask them to lower it to 450kg. Most suppliers are flexible on thresholds for good customers.
📚 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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