Sales Analysis: French fries are all the rage!
After discussing cases where administration every gram of coffee or where a restaurant claims to pour bottled water into the pitchers served to customers, the Nantes Administrative Court of Appeal provides an opportunity to illustrate another method for calculating a restaurant’s revenue: french fries!
A restaurant was in fact subject to a tax audit during whichadministration its accounting recordsadministration neither conclusive nor accurate, and therefore reconstructed its revenue to determine its taxable income.
The tax inspector first calculated the total amount spent on“purchases of frozen fries that were subsequently cooked,”then reduced this amount by 18.3%, which he claimed represented the loss rate. He then determined the number of meals sold with fries and applied an average price to that number.
As for the menus without fries, he used the figures provided by the company; to estimate revenue from desserts and beverages, he used the company’s purchase data, reduced by 5%, which he estimated represented losses and complimentary items.
The company attempted to challenge this method, arguing in particular that:
The “frite” method was not applicable to a kebab restaurant. The Court, however, rejected the argument, noting that the restaurant“offered not only kebabs but also pizzas, tacos, and croque-monsieurs.”
Kebab restaurants reportedly have a waste rate of around 25 to 30 percent for french fries. The Court finds, however, that the company has not demonstrated“that the operating conditions of the establishments in question are similar to those of its own establishment.”
There was a business practice that allowed customers to request an extra serving of fries. The Court, however, finds that the company has not provided any evidence of the existence of this practice.
The reported revenue exceeds that of eight other restaurants in Morbihan, and the gross margin ratios are higher than those of 267 establishments in Brittany. The Court finds that this has no bearing on the tax reassessment.
The restaurant proposed an alternative method based on a revenue ratio observed at kebab-style establishments located in Brittany with similar revenue levels. The Court, however, finds that this method does not provide a more accurate estimate of the company’s revenue than the method used byadministration.
The tax assessment against the restaurant and the imposition of penalties have been confirmed.
CAA Nantes, June 10, 2025, No. 24NT02718
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