The formula
Promotion price = Normal price x (1 – Discount %)
Break-even orders = (Baseline orders x Profit per order at full price + Marketing cost) / Profit per order on promotion
Why the formula works this way: a discount comes out of your margin, never out of your cost. The plate holds the same ingredients at the same cost whether the guest paid full price or 20% less, so profit per order falls much faster than the price does. A 20% discount on a $28 dish with an $8.40 plate cost does not cut profit by 20%, it cuts it from $19.60 to $14.00, nearly 29%. The only way back is volume, and the break-even line tells you exactly how much volume: the total profit you would have made anyway, plus what you spent marketing the deal, divided by the smaller profit each promoted order now earns.
How to use it, with an example
- Cost the dish properly first. If you do not know your plate cost, work it out ingredient by ingredient before you touch the discount.
- Set the baseline honestly: the orders this item, or this daypart, does in a normal period with no deal running.
- Forecast the promoted orders conservatively. Promotions feel bigger than they are. If your forecast only just clears break-even, it does not clear it.
- Include every marketing cost: marketplace promotion fees and paid placement count, not just printed flyers.
- Check the answer against capacity. Break-even orders your kitchen and dining room cannot physically serve are not a plan.
Worked example: A grill promotes a $28 dish that costs $8.40 to plate, at 20% off. The promotion price is $22.40 and profit per order falls from $19.60 to $14.00. The dish normally sells 500 orders in the period, worth $9,800 of profit. The promotion, with $150 of marketing, needs 711 orders just to match that, which is 211 extra orders. The forecast is 750 orders, giving total profit of $10,350, which is $550 more than doing nothing. Worth running, but with only 39 orders of headroom. The calculator above is prefilled with these same numbers.
Promotions are far easier to judge when the plate cost, the discount and the order count all come from the same records. With Odoo for Restaurants, the deal is set up once in the Odoo POS module, the discount is applied consistently at every till, and the redeemed orders are counted as they happen, so a promotion review is a report on what actually sold at the deal price, not a guess from the till roll.
Common mistakes
- Judging a promotion on revenue. A discounted week almost always shows higher sales. Revenue going up while profit goes down is the classic promotion trap, and it is invisible until you run the per-order profit.
- Forgetting that regulars redeem too. The discount is not only paid to the new guests it attracts. Every regular who would have paid full price takes the same cut, and on in-house offers most covers use the deal.
- Using the menu price instead of the plate cost. Profit per order is price minus what the dish actually costs to make. If your plate cost is a guess, your break-even is a guess. The restaurant menu costing guide shows how to cost a dish properly.
- Promoting your most expensive dish. High plate cost means thin profit per order, which means a brutal break-even volume. Promoting a dish with a low food cost and a healthy margin, the kind identified when you work through how to reduce restaurant food cost, gives the discount somewhere to come from.
- Ignoring capacity. Break-even is a count of orders your kitchen has to produce and your room has to seat. If the number exceeds what a service can handle, the promotion fails no matter how good the marketing is.
- Leaving the marketing cost out. Marketplace apps charge for promotion placement on top of commission. A deal that breaks even before its promotion fees does not break even.
FAQs
How much extra volume does a 20% discount need?
More than most operators guess. At a 70% gross margin, a 20% discount needs roughly 40% more orders just to stand still, because the discount comes entirely out of the margin. At a 60% margin it needs 50% more. Run your own plate cost through the calculator rather than using the discount percentage as the answer.
Is a buy-one-get-one-free offer a 50% discount?
On the pair, yes. The guest pays for one dish and receives two, and you plate two dishes at full cost. BOGO deals therefore need very large volume gains, typically double or more, unless the second dish is a deliberately cheap item.
Should I count guests who would have come anyway?
Yes, and the calculator does. Break-even is measured against the profit you would have made with no promotion, so every order a regular places at the discount is an order earning the smaller profit. Promotions only win on genuinely extra orders above the break-even line.
What discount is safe for a restaurant?
There is no universal safe number, because it depends on your margin. On a dish with a 30% food cost, a 10 to 15% discount is usually absorbable with modest extra volume. At 25% and beyond, the required volume climbs steeply, and at the point where the discounted price meets the plate cost, no volume works at all.
Are free items better than percentage discounts?
Often, yes. A free dessert or drink costs you its plate cost, which is far less than its menu price, while the guest values it at the menu price. A $9 dessert with a $2.50 plate cost given away is cheaper for you than $9 off the check.
How do I know if last month’s promotion worked?
Compare total profit, not total sales: orders at the deal price multiplied by profit per promoted order, minus marketing cost, against the profit the same period would have made at full price. If you cannot split deal orders from full-price orders in your reports, fix that first, because without it every promotion review is an opinion.
