Why Discounts Can Destroy Your Restaurant’s Profit (and What to Do Instead)

Restaurant discounts slash margins and devalue your brand - but there are smarter alternatives.

Discounts might seem like a quick way to attract more customers, fill empty tables, or compete with nearby venues. But for many independent restaurants, discounting is a dangerous habit that erodes margins, trains customers to expect lower prices, and leaves owners wondering why their bank account doesn’t reflect their sales figures.

The good news? There are smarter ways to win loyal guests and boost sales - without destroying your profitability.

First, let’s look at the hidden cost of discounts…

1. Discounts Slash Your Margins

Let’s say your restaurant has a 70% gross profit (GP). On a £50 meal, you make £35 gross profit before overheads. If you offer a 20% discount, the bill drops to £40, but your costs stay the same - so your GP falls to £25. That’s a 28% profit drop just for offering 20% off.

Multiply that across a busy month, and discounts can wipe out thousands of pounds in potential profit.

2. Discounts Train Customers

Once guests get used to discounts, they’ll wait for the next offer before booking again. Instead of valuing your food, drink, and hospitality, they see you as a “deal.” This makes it harder to attract full-paying, loyal customers.

3. Discounts Devalue Your Brand

Independent restaurants thrive on quality, story, and experience. Heavy discounting sends the opposite message: that your food isn’t worth full price. Over time, this weakens your brand and makes it harder to raise prices when costs increase.

So if discounts are destructive, what should you do instead? Here are three strategies that boost sales and loyalty while protecting profit.

1. Focus on Value-Added Promotions

Instead of cutting prices, add value. Guests feel like they’re getting more, but your margins stay protected.

Examples:

• “Free bottle of house wine with two mains” - lower cost than a blanket discount.

• “Wine pairing experience” - higher perceived value with good margins.

• “Chef’s tasting menu” - increases spend per head while controlling portions.

2. Upselling and Cross-Selling

Train your team to recommend high-margin items. Upselling isn’t pushy when it’s done with care — it enhances the guest experience.

Examples:

• Suggesting premium sides or upgrades

• Pairing cocktails or wines with mains

• Highlighting signature dishes with higher margins

Even small upsells, repeated across hundreds of covers, can add thousands of pounds in monthly profit.

3. Create Value-Based Offers

Guests aren’t always looking for the cheapest option; they want a great experience. Craft offers that emphasise value without cutting price.

Examples:

• Set menus with limited options - better cost control and reduced waste

• Themed nights (e.g. seafood night, regional cuisines) - adds excitement without discounts

• Loyalty rewards - points or perks for repeat visits instead of price cuts

  
  

Discounts might bring in short-term traffic, but they almost always come at the expense of long-term profitability. By shifting from discounts to value-based promotions, upselling, and smarter offers, independent restaurants can attract loyal guests, strengthen their brand, and boost profits.

The Profit First system flips the traditional approach: instead of chasing sales at any cost, you prioritise profitability first. By tracking margins and setting aside money in the right accounts (profit, VAT, staff pay, owner’s pay, operating expenses), you’ll know instantly if an offer adds value or destroys your bottom line.

At Profit First Hospitality, we help restaurant owners implement systems that protect profit and grow cash flow sustainably. Get in touch and we’ll show you how to take back control of your cash flow.