Nearly 60% of new restaurants close within their first three years, often due to poor menu pricing decisions. Most new restaurant owners calculate their food costs way too optimistically and only realize after opening that their dishes barely generate any revenue. You need to calculate if your menu will actually turn a profit before you open your doors.
Why many opening menus fail financially
Most new restaurant owners make the same mistake: they look at what competitors charge and think 'we can do that too'. But they forget to check if they actually make a profit at those prices.
⚠️ Watch out:
Many restaurants fail not because of bad chefs, but because of bad cost calculations. You can have the best chef in town, but if your food cost hits 45%, you'll go bankrupt fast.
The basics: calculating food cost percentage
For each dish on your menu you need to know: what do the ingredients cost and what's the food cost percentage?
The formula is straightforward:
Food cost % = (Ingredient costs ÷ Selling price excl. VAT) × 100
💡 Example: Pasta Carbonara
Ingredients per portion:
- Pasta: €0.45
- Bacon: €1.20
- Eggs: €0.35
- Cheese: €0.85
- Other (oil, pepper, etc.): €0.25
Total ingredient costs: €3.10
Menu price: €16.50 incl. VAT = €15.14 excl. VAT
Food cost: (€3.10 ÷ €15.14) × 100 = 20.5%
What food cost is viable?
For a new restaurant, these are typical guidelines per type:
- Casual dining: 28-35% food cost
- Fine dining: 28-32% food cost
- Fast casual: 25-30% food cost
- Delivery/takeaway: 30-35% food cost (higher packaging costs)
⚠️ Watch out:
Going above 35% food cost? Then it becomes really difficult to cover all other costs (rent, staff, energy) and still make a profit.
Calculate your total cost structure
Food cost matters, but it's not the whole picture. You also have other costs:
- Staff costs: 25-35% of revenue
- Rent and energy: 8-15% of revenue
- Other costs: 10-15% of revenue
- Profit: 5-15% of revenue
💡 Example: Break-even calculation
Restaurant with 40 seats, average bill €25:
- Food cost: 30% = €7.50
- Staff costs: 30% = €7.50
- Rent + energy: 12% = €3.00
- Other costs: 13% = €3.25
- Profit: 15% = €3.75
To make €3,000 profit per month, you need 800 covers (27 per day).
Test your menu in advance
Before you open, calculate your entire menu. Focus on these 3 categories:
- Winners: Low food cost, popular (these become your bestsellers)
- Losers: High food cost, unpopular (get rid of them)
- Puzzles: Low food cost, unpopular (promote more or adjust)
Most kitchen managers discover too late that their "signature dishes" - the ones they're most proud of - often have the worst margins. They fall in love with complex recipes that eat into profits while the simple dishes actually keep the lights on.
💡 Example: Menu analysis
Of your 20 dishes:
- 5 dishes under 25% food cost (winners)
- 10 dishes between 25-35% food cost (fine)
- 5 dishes above 35% food cost (adjust or remove)
Make sure at least 60% of your menu is under 32% food cost.
Digital help with cost calculations
Excel works, but quickly becomes confusing. Apps automatically calculate your food cost per dish and warn you if you exceed your target percentage.
Especially useful for new restaurants: you immediately see which dishes are profitable before you have your menu printed.
How do you calculate if your opening menu is financially viable?
Gather all ingredient costs
Make a list of each ingredient per dish with exact quantities and prices. Also include small things like oil, salt, garnish. Calculate with realistic purchase prices, not 'maybe I'll get a discount'.
Calculate food cost per dish
Use the formula: (Ingredient costs ÷ Selling price excl. VAT) × 100. Important: always calculate excluding VAT! At 9% VAT, divide the menu price by 1.09 to get the price excl. VAT.
Check your total menu mix
Make sure at least 60% of your dishes are under 32% food cost. Estimate which dishes will be popular and check if they're profitable enough. Adjust prices or remove dishes that are too expensive.
✨ Pro tip
Calculate food costs for your 6 most expensive menu items within your first 2 weeks of menu development. These high-ticket dishes will determine your restaurant's profitability before you print a single menu.
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
What food cost is normal for a new restaurant?
For most new restaurants, 28-35% food cost is realistic. If you go higher, it becomes difficult to cover all other costs and still make a profit.
Should I include VAT in my cost calculation?
No, always calculate excluding VAT. The VAT you receive must be paid to the tax authorities, so it's not real revenue for you.
Can't I just estimate my food cost?
Estimating usually goes wrong. Many entrepreneurs forget small ingredients or calculate too optimistically. Exact calculation prevents surprises after opening.
What if my competitor is cheaper?
First check if your cost calculation is correct. Maybe your competitor has a different kitchen setup, different suppliers, or is making a loss. Never blindly copy someone else's prices.
📚 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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