A new competitor nearby can hit your revenue hard. Many restaurant owners see 15-30% fewer guests directly when a new place opens in the area. Here's how to analyze what's happening and take the most effective actions.
Analyze the impact within 2 weeks
Don't panic—measure exactly what's happening first. Compare your figures from the first 2 weeks after opening with the same period last year.
💡 Example:
Restaurant Marco saw after competitor opening:
- Revenue week 1: €8,200 (was €11,500)
- Number of covers: 185 (was 265)
- Average check: €44.30 (was €43.40)
Conclusion: 30% fewer guests, but higher check value
Track these key numbers:
- Total revenue: What percentage decline?
- Number of covers: Fewer guests or smaller groups?
- Average check value: Are guests ordering less per person?
- Time slots: Which moments are hit hardest?
Determine your response strategy
Based on your analysis, pick one strategy. Don't try everything at once—that gets expensive and you won't know what works.
💡 Example strategies:
With 20-30% revenue decline:
- Price: Happy hour 17:00-19:00 with 20% discount
- Value: 3-course menu for the price of 2 courses
- Service: Free amuse or digestif
- Unique: Live music on Thursday
Price strategy (short-term):
- Happy hours during quiet moments
- Lunch deals to attract new target audience
- Group arrangements with discounts
Value addition (medium-term):
- Better service than competitor
- Unique dishes they don't have
- Improve atmosphere and experience
⚠️ Watch out:
Lower your prices only temporarily. Becoming permanently cheaper is a race to the bottom that nobody wins.
Monitor your margins during adjustment
If you're cutting prices or giving extras for free, check weekly that you're still profitable. Many entrepreneurs forget this step and lose twice over.
Check every week:
- Food cost percentage: Must stay below 35% even with discounts
- Break-even point: How many covers do you need minimum?
- Cashflow: Can you still pay your fixed costs?
💡 Example calculation:
You give 20% discount on your €25 main course:
- New price: €20.00 incl. VAT
- Excl. VAT: €18.35
- Ingredient costs: €7.50
- New food cost: (€7.50 / €18.35) × 100 = 40.9%
Too high! Adjust the dish or give less discount.
Monitor your competitor and the market
Keep an eye on what your competitor's doing and how the market reacts. Sometimes the impact's temporary because people are just curious about the new place.
Check monthly:
- Are they still busy or is it declining?
- What prices do they charge?
- What do guests say about them (reviews)?
- Is your revenue slowly recovering?
After 3-6 months you'll know if the impact's permanent or if the market stabilizes. Based on real restaurant P&L data, most establishments see their numbers level out within this timeframe. Then you can plan your long-term strategy.
Use figures to adjust course
Track all your actions and results in one system. That way you see what works and what doesn't, and can adjust quickly without guessing.
A food cost calculator helps you monitor your margins during this challenging period, so you don't make decisions blindly while adjusting your strategy.
How do you respond to new competition? (step by step)
Measure the impact (week 1-2)
Compare your revenue, number of covers and average check value with the same period last year. Also note which time slots are hit hardest.
Choose one response strategy
Decide whether you go for price (discounts), value (better service) or uniqueness (something they don't have). Never try everything at once.
Check your margins weekly
Calculate whether your food cost stays below 35% and whether your break-even point is achievable with fewer guests. Adjust if you're losing too much.
Monitor and adjust (month 1-3)
Keep track of what works and what doesn't. Check if your competitor is still busy and whether your revenue is slowly recovering.
Determine long-term strategy (after 3-6 months)
Decide whether the impact is permanent and permanently adjust your business model, or go back to your original approach if the market stabilizes.
✨ Pro tip
Track your competitor's busy times for 4 weeks and schedule your promotional activities during their quieter periods. You'll capture more market share without direct competition.
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 long does it take to know if the impact is permanent?
Usually 3-6 months. In the first months people are often curious about the new place, after that the market stabilizes. You'll see patterns emerge in your weekly reports.
What if my revenue drops more than 40%?
Then there's probably more going on than just competition. Check if your service, quality or prices haven't been right for a while. A 40% drop suggests deeper issues.
Should I lower my prices immediately if a competitor opens?
No, wait 2 weeks first to measure the real impact. Many entrepreneurs react too quickly and make the problem worse with unnecessary price cuts that hurt their margins.
📚 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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