How to calculate if a promotion is profitable (before you launch it)
A 20 % discount doesn’t cost you 20 % of your profit: it costs a lot more. The math, step by step, with numbers in pesos.
Knowing how to calculate if a promotion is profitable saves you from the costliest mistake in hospitality: a full room and less money at the end of the month. A discount doesn’t come off the price, it comes off your margin. And your margin is much smaller than the price.
First: food cost and margin per dish
Take a burger with fries at 16,000 ARS. Ingredients cost 5,600 ARS, a 35 % food cost. What’s left to cover wages, rent and profit is 10,400 ARS per plate. To keep it simple, we’re leaving out taxes and fees.
| Discount | Price | Left per plate |
|---|---|---|
| No discount | 16,000 ARS | 10,400 ARS |
| 10 % | 14,400 ARS | 8,800 ARS |
| 20 % | 12,800 ARS | 7,200 ARS |
| 30 % | 11,200 ARS | 5,600 ARS |
| 2-for-1 | 8,000 ARS each | 2,400 ARS |
How many more sales a discount needs
The formula is simple: original margin ÷ discounted margin. At 20 % off: 10,400 ÷ 7,200 = 1.44. You need to sell 44 % more burgers just to break even with where you were.
Example with a 35 % food cost. A different food cost changes the numbers.
When a promotion is profitable
- It fills idle capacity. An empty Tuesday already has rent and wages paid; every extra cover adds up.
- It discounts low-food-cost items: drinks, fries, coffee. The discount hurts less there.
- It pulls other orders. 2-for-1 pints at happy hour, but the sharing platter stays full price.
- It brings guests who come back without a discount next time.
Promo codes as channel labels
Give each channel its own code: NEIGHBORS10 for the coworking next door, another for your Instagram story, another for the influencer. At month’s end, count redemptions and average check per code, and you’ll know which channel paid for the promo and which just gave margin away.
Looking for promotions that don’t wreck your margin? See promotion ideas and how to build combos.
What food cost is reasonable for a restaurant?
Many places aim for 25–35 %, but it depends on the concept: a café usually runs lower than a parrilla. What matters is knowing it for each dish.
How do I know if a promotion worked?
Compare covers, average check and total margin against a similar week without the promo, and check how many code users came back afterwards.
- #promo codes
- #promotions
- #margin
- #analytics