Your competitors seem cheaper, but you know your margins are already tight. This dilemma keeps many restaurant owners awake at night. The problem is often that you don't know exactly what your dishes cost, so you can't judge if your competitor is really cheaper or just running at a loss.
Why do competitors always seem cheaper?
The feeling that your competitor is cheaper often comes from incomplete information. You see their menu, but not their cost prices, ingredient quality, or profitability.
⚠️ Watch out:
A competitor who's €3 cheaper can also make €3 less profit. Or use lower quality ingredients. Or be balancing on the edge of bankruptcy.
First check your own cost prices
Before you can judge if a competitor is really cheaper, you need to know what your dishes actually cost. Many entrepreneurs estimate this and are off by 20-30%.
💡 Example:
You sell a steak for €28.00 and think the ingredients cost €8.
- Steak 200g: €6.40
- Garnish and vegetables: €1.20
- Sauce and butter: €0.80
- Oil and spices: €0.40
Actual cost: €8.80 (not €8.00)
On €25.69 excl. VAT that's 34.3% food cost. If you thought it was €8 (31.1%), there seemed to be more room for price reduction than there actually is.
Analyze what your competitor does differently
If your competitor is consistently cheaper, that can have different causes:
- Different supplier: Maybe they have better purchasing conditions
- Different quality: 180g steak vs your 200g
- Different overhead: Lower rent, fewer staff
- Different strategy: Loss leader to attract customers
- Different efficiency: Less waste, better planning
Calculate your break-even point
Before you lower your prices, calculate what you need to charge at minimum to break even. It's a pattern we see repeatedly in restaurant financials - owners who skip this step often find themselves underwater within six months.
💡 Example calculation:
Monthly fixed costs: €15,000
- Average food cost: 30%
- Labor costs: 35% of revenue
- Other costs: 10% of revenue
You need at least €15,000 / 0.25 = €60,000 revenue to break even.
Three strategies to respond
Strategy 1: Lower costs
- Find a better supplier
- Reduce waste
- Work more efficiently
- Optimize recipes
Strategy 2: Add value
- Better service
- Unique dishes
- Better ambiance
- Higher quality ingredients
Strategy 3: Find a niche market
- Specialize in a particular cuisine
- Focus on a different target audience
- Develop a unique concept
⚠️ Watch out:
Lowering prices without knowing your costs is Russian roulette. You can accidentally go below your break-even and start running losses.
Should you adjust your prices?
Only adjust your prices if you're sure that:
- Your cost price is exact
- You'll still be profitable
- The difference is structural (not temporary)
- You can't offer other advantages
With food cost tracking systems you see exactly what each dish costs and how much room you have for price adjustments.
How do you analyze the competition situation? (step by step)
Calculate your actual cost prices
Add up all ingredients from your 5 best-selling dishes. Don't forget anything: oil, butter, spices, garnish. Work out what your food cost percentage really is.
Analyze the difference with your competitor
Go eat at your competitor and assess: same portion size? Same quality? Same service? Note the exact differences in price and what you get.
Calculate your minimum selling price
Determine what you need to charge at minimum to stay profitable. Include your fixed costs, desired profit, and all variable costs in the calculation.
Choose your strategy
Decide whether you'll lower costs, add value, or look for a different market. Test small adjustments first before making major changes.
✨ Pro tip
Don't just compare menu prices - analyze per-unit costs over a 30-day period. That €24 competitor steak might be 180g while yours is 220g, making theirs actually more expensive per gram.
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
Should I lower my prices if my competitor is cheaper?
Only if you're sure you'll still be profitable. Calculate your actual cost price and minimum selling price first. Many entrepreneurs lower prices and accidentally start running losses.
How do I know if my competitor is actually making a profit?
You don't, and that's the point. A competitor can temporarily run losses to gain market share, or use lower quality ingredients. Focus on your own profitability.
What if I can't lower my costs any further?
Then you need to add value: better service, unique dishes, or find a different target audience. Not every customer chooses purely on price.
Would it be better to wait until my competitor raises their prices?
That's a risk. If your competitor can consistently be cheaper through better purchasing or lower costs, that might never happen. Focus on what you can control.
📚 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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