Published on January 16, 2025 | 10 min read
Your Profit & Loss (P&L) statement is the single most important financial document for your restaurant. It tells you whether you're making money, where you're spending it, and what needs to change.
Yet many restaurant owners glance at the bottom line, see a profit (or loss), and move on. That's like checking your pulse but ignoring your blood pressure — you're missing critical health signals.
This guide breaks down every line of a restaurant P&L in plain English, with benchmarks, red flags, and actionable insights you can use today.
A Profit & Loss statement (also called an income statement) shows:
It covers a specific period — usually a week, month, quarter, or year. Unlike a balance sheet (which shows what you own and owe at a point in time), the P&L shows performance over time.
Here's the standard structure, top to bottom:
Gross Sales $50,000 - Discounts & Comps ($1,200) - Refunds ($300) ──────────────────────────────────────── Net Sales $48,500
What it means: This is your top line — total money customers paid you.
Key metrics:
Red flags:
Beginning Inventory $8,000 + Purchases $15,000 - Ending Inventory ($7,500) ──────────────────────────────────────── COGS $15,500 COGS % 32.0%
What it means: The cost of food and beverages you sold. This is your prime cost ingredient.
Formula:
COGS % = (COGS ÷ Net Sales) × 100
Benchmarks:
Red flags:
Net Sales $48,500 - COGS ($15,500) ──────────────────────────────────────── Gross Profit $33,000 Gross Margin 68.0%
What it means: Money left after paying for the food/beverage. This funds everything else (labor, rent, utilities, profit).
Benchmark: Aim for 65–72% gross margin.
Wages & Salaries $14,000 Payroll Taxes $1,400 Benefits $800 ──────────────────────────────────────── Total Labor $16,200 Labor % 33.4%
What it means: Total cost of your team, including taxes and benefits.
Formula:
Labor % = (Total Labor ÷ Net Sales) × 100
Benchmarks:
Red flags:
COGS $15,500 + Total Labor $16,200 ──────────────────────────────────────── Prime Cost $31,700 Prime Cost % 65.4%
What it means: Your two biggest expenses combined. This is the most important number on your P&L.
Golden rule: Keep prime cost under 60–65% of sales. If it's over 65%, you have a serious problem.
Why it matters: Prime cost is largely controllable (unlike rent). If it's too high, you can't be profitable no matter how much you sell.
Rent $4,000 Utilities $1,200 Marketing $500 Supplies $800 Insurance $600 Repairs & Maintenance $400 Credit Card Fees $1,200 Other $700 ──────────────────────────────────────── Total Operating Expenses $9,400 Operating Expense % 19.4%
What it means: Everything else it takes to run the business.
Benchmarks:
Red flags:
Gross Profit $33,000 - Total Labor ($16,200) - Operating Expenses ($9,400) ──────────────────────────────────────── EBITDA $7,400 EBITDA % 15.3%
What it means: Operating profit before accounting for loans, taxes, and non-cash expenses.
Benchmark: Healthy restaurants aim for 10–15% EBITDA.
EBITDA $7,400 - Interest ($500) - Depreciation ($800) - Taxes ($1,200) ──────────────────────────────────────── Net Profit $4,900 Net Profit % 10.1%
What it means: The actual money you keep (or lose).
Benchmarks:
Don't just read the numbers — compare them. Here's a quick diagnostic:
COGS % + Labor % = Prime Cost %
Look for trends:
Any line item that jumped 20%+ month-over-month deserves investigation.
You can have a 10% net profit and still be in trouble if prime cost is 70% (you're one bad month from disaster).
Dollar amounts are meaningless without context. $5,000 in labor is great if sales are $20,000 (25%) but terrible if sales are $10,000 (50%).
One month's P&L is a snapshot. Compare to last month, same month last year, and budget.
Your car payment isn't a restaurant expense. Keep them separate or your P&L lies to you.
If you don't do monthly inventory counts, your COGS is a guess.
Your P&L isn't just a report for your accountant — it's your restaurant's report card. Read it weekly (at minimum monthly), compare it to benchmarks, and act on what it tells you.
Focus on prime cost first. If you can keep COGS + Labor under 60%, you'll be profitable. Everything else is fine-tuning.
Want real-time P&L visibility without the accounting headache? Try Restro Manager — track daily sales, expenses, and profit with zero manual entry.
Want to simplify your restaurant finances? Try Restro Manager — track cash-outs, invoices, and P&L in real-time with zero manual entry.
