Right now, many restaurant owners are facing tight cashflow and considering discounts as a quick fix. But discounts cost you margin, and most operators don't calculate what they actually deliver. Here's how to decide if discounts make financial sense for your situation.
Understanding discount mechanics
A discount isn't magic for cashflow problems. It only works if you generate more volume than you lose in margin.
💡 Example:
You offer 20% off all main courses. Normally you sell 100 mains weekly at €25 = €2,500 revenue.
- With discount: €20 per dish
- You now need 125 dishes for same revenue
- That's 25% more volume required
Question: will your discount actually bring 25% more guests?
Calculate your break-even volume
Every discount has a break-even point you can calculate.
Formula:
Required volume increase = Discount percentage / (100% - Discount percentage) × 100%
💡 Examples:
- 10% discount: 10 / (100-10) × 100 = 11.1% more volume
- 20% discount: 20 / (100-20) × 100 = 25% more volume
- 25% discount: 25 / (100-75) × 100 = 33.3% more volume
Higher discounts make break-even exponentially harder.
Analyze your variable costs
From analyzing actual purchasing data across different restaurant types, discounts work best with low variable costs. More volume means higher ingredient costs, but fixed costs (rent, staff) stay constant.
- Food cost under 30%: discounts can work
- Food cost above 35%: dangerous territory
- Labor costs: can your team handle increased volume?
⚠️ Watch out:
Extra staff for rush periods eats up discount benefits. Factor this into calculations every time.
Smart alternatives for quick cash
Discounts aren't your only option for fast money:
- Prepayment incentives: gift cards with 10% bonus value
- Strategic upselling: push sides, drinks, desserts
- Faster turnover: quicker service = more covers nightly
- Wine focus: higher margins, immediate payment
💡 Gift card example:
"Buy €100 gift card, get €110 value." You get €100 cash now, guest returns later.
- Immediate: €100 cash in
- Later: €110 food value (costs ~€35 to produce)
- Net benefit: €65 vs. typical €30 margin on €100
Start with limited tests
Don't jump into 25% off everything. Test controlled promotions first:
- One weekday: 15% off main courses
- Happy hour drink specials (better margins)
- Fixed lunch pricing
Measure after two weeks: volume increase? Improved cashflow? Then consider expanding.
Red flags to stop discounting
Pull the plug if:
- Food cost climbs above 35%
- Staff becomes overwhelmed
- Customers only visit with discounts
- Cashflow doesn't actually improve
⚠️ Watch out:
Discount-only customers vanish once promotions end. They're not real customers. Build value, not price dependency.
Track the right metrics
Monitor these numbers during discount periods:
- Weekly total revenue
- Cover count
- Average check size
- Total costs (food plus additional labor)
- Net cashflow improvement
Your discount succeeds only if all metrics trend positive.
How do you decide if discounts are smart? (step by step)
Calculate your current margins
Check your food cost percentage on your most popular dishes. If this is above 35%, discounts are risky. Also calculate your total fixed costs per week.
Determine the required extra volume
Use the formula: Discount percentage / (100% - Discount percentage) × 100%. This shows how much more guests you need to break even.
Test with a limited promotion
Start with one day a week 15% discount on main courses. Measure after 2 weeks if you actually have more net cashflow. Then expand to more days.
✨ Pro tip
Test discounts on drinks during slow periods first - beverages typically run 20-25% cost, giving you more discount room than food items. Monitor for exactly 14 days before expanding.
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 discount can I give maximum?
That depends on your margins. At 30% food cost you can give 15-20% discount and still profit. At 35% food cost, anything above 10% becomes dangerous.
Do discounts always work for better cashflow?
No, only if you generate enough extra volume. With 20% discount you need 25% more guests for same revenue. That often doesn't happen.
What are better alternatives than discounts?
Gift cards with bonus value, upselling drinks and desserts, or faster table turnover. These improve cashflow without killing margins.
How long should I keep discounts running?
Test for two weeks first. If net cashflow doesn't improve, stop immediately. Long-term discounts train guests to only come with deals.
📚 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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