The Clarets looked uncharacteristically sloppy during the clash and were undone by goals from Jean Michael Seri, Andre Schurrle and Aleksandar Mitrovic. It was an afternoon to forget for Dyche's men, who will now be looking ahead to the second leg of their Europa League qualifier against Olympiacos on Thursday, having lost the first leg 3-1.
"They were the better side. More inventive, more productive and possibly signs that their £100m has been spent well it seems on that performance," Dyche told Sky Sports.
"We huffed and puffed our way back into the game, we have a spirit and a belief and demand in the players and they've at least got themselves back in it at 3-2. We had some moments, so did they, but realistically over the whole game, they were the better side.
"At the end of the day, our performance wasn't up to where it needs to be and theirs was."
The performance draws attention to the fact that Burnley have already had to deal with a stacked fixture list which has seen them contend with the early qualifying rounds of the Europa League. Dyche went on to discuss the impact of the Clarets' European adventure.
"It is more problematic [the Europa League] in that we didn't get the players in that we had hoped for in numbers. We've now got three injuries with Johann as well and they're important players for us.
"It's hard for the players, you've got to remember, they constantly get bombarded with negatives about being in the Europa League but for a club like Burnley, it is a fantastic positive. If they're getting told that all the time, it starts to sink in after a time and our job is to obviously look beyond that."