Ever wondered why your discount promotion brought more customers but left you with less money in the bank? Most restaurant owners focus on the revenue boost but forget to calculate the margin hit. Here's how to run the numbers before you launch your next promotion.
Why discount promotions often backfire
You're thinking: 20% off equals more guests equals more money. But often you'll see packed tables yet shrinking profits. That's because you can't just look at revenue - you need to track your margin per guest too.
⚠️ Note:
Every discount promotion slashes your margin per plate. The real question is whether extra volume makes up for it.
The three formulas that matter
For accurate calculations, you need these three formulas:
- New selling price = Normal price × (100% - discount percentage)
- New margin per plate = New selling price - Ingredient costs
- Break-even volume = Normal revenue / New selling price
These three calculations show you exactly what a promotion costs and when it starts paying off.
Step 1: Calculate your new margin per plate
Start with your top seller. Figure out what you'll actually keep after the discount hits.
💡 Example:
Pasta carbonara, normally €18.50 incl. VAT:
- Normal price excl. VAT: €16.97
- Ingredient costs: €5.10
- Normal margin: €11.87 per plate
With 20% discount:
- New price excl. VAT: €13.58
- New margin: €8.48 per plate
- Loss per plate: €3.39
Step 2: Find your break-even point
How many additional guests do you need just to match your normal daily take?
Break-even formula: (Normal margin / New margin) × Normal number of guests
💡 Example:
Normally 80 guests per day:
- Break-even: (€11.87 / €8.48) × 80 = 112 guests
- You need 32 extra guests (40% more!)
- Fall short and you'll earn less than normal
Step 3: Model different scenarios for daily revenue
Now you can test various outcomes. What happens with 10%, 20% or 30% more covers? This is the kind of thing you only learn after closing your first month at a loss - always run multiple scenarios before committing.
💡 Scenario calculation:
With 20% more guests (96 instead of 80):
- Revenue: 96 × €14.81 = €1,422 (vs €1,480 normal)
- Profit: 96 × €8.48 = €814 (vs €950 normal)
- Result: €136 less profit despite higher revenue
When discount promotions actually pay off
Discounting makes sense in specific situations:
- Dead periods: Fixed costs keep ticking, every extra guest helps cover overhead
- Customer acquisition: If they return later at full price
- Inventory management: Better to earn something than waste product
- Market defense: Sometimes keeping share trumps short-term profit
⚠️ Note:
Discount promotions can create dependency. Customers get trained to wait for deals and won't pay full price.
Smarter promotion alternatives
Instead of slashing your main prices, consider:
- Complimentary sides: Only costs you ingredients (€2-3)
- Buy-one-get-one-half-off: Boosts average check size
- Off-peak pricing: Fills slow periods without affecting peak rates
- Loyalty programs: Builds repeat business without immediate discounts
Tools for promotion planning
Food cost calculators can quickly model different discount scenarios. You'll immediately see what each percentage point does to your margin and how many extra covers you need to break even.
These tools automatically calculate your new food cost percentage and show the gap versus normal margins. So you can predict whether a promotion will actually work before you launch it.
How do you calculate the impact of a discount promotion?
Calculate your current margin per dish
Take your best-selling dish and calculate: selling price excl. VAT minus ingredient costs. This is your normal margin per plate that you use as your baseline.
Calculate the new margin after discount
Lower your selling price by the discount percentage and subtract the ingredient costs again. The difference from step 1 is what you lose per plate.
Determine how many extra guests you need
Divide your normal margin by your new margin and multiply by your normal number of guests. This is your break-even point where you earn the same as normal.
Calculate different scenarios
Calculate what happens with 10%, 20% and 30% more guests. Compare the total profit with your normal day to see which scenario works best.
✨ Pro tip
Run a 48-hour test promotion on your slowest weekdays first, tracking exactly how many additional covers you generate. Use that conversion rate to model larger weekend promotions with actual data instead of guesswork.
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 at maximum?
That depends on your margin structure. With 30% food cost you could theoretically discount up to 70% without losing money on ingredients, but then you're earning nothing on labor and overhead. Stay under 25% discount to maintain some profitability.
Should I calculate discounts on prices including or excluding VAT?
For internal calculations, always work excluding VAT since that's your actual revenue. But promote the discount including VAT on menus because customers understand that better.
Is it better to discount drinks instead of food?
Drinks typically have lower cost ratios (18-25% vs 30-35% for food), so you can discount them more aggressively without destroying margins. Plus drink discounts often drive food sales too.
📚 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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