A P&L statement reveals whether your restaurant generates profit or bleeds money. Most hospitality owners get these reports from their accountants but can't decode what the numbers actually mean. You'll discover how to interpret your P&L statement and what each figure means for your business.
What's in a P&L statement?
A P&L statement follows a simple formula: revenue minus costs = profit (or loss). For hospitality businesses, the critical components include:
- Net revenue: Your sales excluding VAT
- Cost of goods sold: What your ingredients cost
- Gross profit: Revenue minus cost of goods
- Labor costs: Wages, social contributions, outsourcing
- Other expenses: Rent, energy, insurance, etc.
- Net result: What remains (profit or loss)
The critical ratios for hospitality
Raw numbers won't tell your story. Percentages will. These are the ratios you must monitor:
💡 Example P&L statement:
Restaurant with €500,000 annual revenue:
- Net revenue: €500,000 (100%)
- Cost of goods sold: €150,000 (30%)
- Gross profit: €350,000 (70%)
- Labor costs: €175,000 (35%)
- Other expenses: €125,000 (25%)
- Net result: €50,000 (10%)
Calculate food cost percentage
Divide cost of goods sold by revenue to get your food cost percentage. This number's absolutely crucial:
Food cost % = (Cost of goods sold / Net revenue) × 100
Healthy food costs for restaurants fall between 28% and 35%. Above 35%? You're likely losing money on your dishes.
⚠️ Watch out:
Some accountants include beverages in cost of goods sold. Beverages typically have lower food costs (15-25%). If you want to check food only, request a breakdown.
Are labor costs under control?
Labor costs often become your biggest expense. Typical ratios for restaurants:
- 30-35% for casual dining
- 35-40% for fine dining (more service required)
- 25-30% for fast casual
Above 40%? You're probably overstaffed or not generating enough revenue per employee.
What stories do the figures tell?
Your P&L statement reveals patterns. From tracking this across dozens of restaurants, these are signals to watch for:
💡 Example analysis:
Restaurant A and B both generate €400,000 revenue:
- Restaurant A: 28% food cost, 38% labor = 5% profit
- Restaurant B: 35% food cost, 32% labor = 8% profit
Restaurant B earns more despite higher food costs because they operate more efficiently.
Red flags in your P&L statement
These signals indicate problems:
- Food cost rises every quarter: Prices haven't adjusted to supplier costs
- Revenue rises, profit falls: Costs grow faster than sales
- Gross profit declines: Portions too generous or prices too low
- Other expenses above 30%: Too many fixed costs for your revenue level
⚠️ Watch out:
Always compare with the same quarter from last year. Hospitality is seasonal. Comparing January with December creates a distorted picture.
From figures to action
A P&L statement captures the past. The real work happens in what you do next:
- Food cost too high? Check your recipes and portion sizes
- Labor costs too high? Analyze your staffing per shift
- Declining gross profit? Time to adjust prices
For daily control you need more than quarterly figures. Daily tracking of food costs and margins gives you real-time insights, so you don't have to wait for your accountant's report.
How do you read a P&L statement? (step by step)
Check your gross profit percentage
Calculate: (Net revenue - Cost of goods sold) / Net revenue × 100. For restaurants this should be between 65% and 72%. Lower means too expensive purchases or too low prices.
Analyze your cost ratio
Food cost (28-35%) + Labor (30-40%) + Other (25-30%) = total costs. One percentage too high? Then you need to take action there.
Compare with previous period
Look at trends, not absolute figures. Rising food cost at the same revenue means your margins are under pressure. Time to adjust prices or portions.
✨ Pro tip
Review your food cost percentage within 72 hours of each month-end closing. A 3-point increase that goes unnoticed for 6 months can cost a €400,000 restaurant nearly €7,200 in lost profit.
Calculate this yourself?
In the KitchenNmbrs app you can do this in just a few clicks. 7 days free, no credit card.
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Frequently asked questions
What is a good profit margin for a restaurant?
A healthy net profit margin falls between 5% and 15%. Below 5% is risky territory, above 15% is excellent performance. Remember: this is after all costs including depreciation.
Why is there no VAT in my P&L statement?
VAT is a pass-through item. You collect VAT from guests and forward it to the tax authority. It doesn't impact your profit, so it's excluded from the P&L statement.
How often should I review my P&L statement?
At minimum quarterly, but monthly is better for spotting trends early. For daily management you'll need other metrics like daily revenue and food cost per dish.
What if my food cost exceeds 35%?
First verify if beverages are included (which lowers the percentage). If not, your portions are too large, prices too low, or ingredient costs too high. Start by analyzing your top-selling dishes first.
Why does my revenue differ from my POS system?
Your POS system displays revenue including VAT, while your P&L statement excludes VAT. There can also be timing differences between when sales occur and when they're recorded.
How do I handle seasonal fluctuations in my P&L analysis?
Compare each month to the same month from previous years, not to the previous month. Track your fixed costs as a percentage of revenue - they'll spike during slow seasons but should balance out over the year.
📚 Sources consulted
- EU Verordening 852/2004 — Levensmiddelenhygiëne (2004) — Official source
- EU Verordening 853/2004 — Hygiënevoorschriften voor levensmiddelen van dierlijke oorsprong (2004) — Official source
- EU Verordening 1169/2011 — Voedselinformatie aan consumenten (2011) — Official source
- NVWA — Hygiënecode voor de horeca (2024) — Official source
- NVWA — Allergenen in voedsel (2024) — Official source
- Codex Alimentarius — International Food Standards (2024) — Official source
- FSA — Safer food, better business (HACCP) (2024) — Official source
- BVL — Lebensmittelhygiene (HACCP) (2024) — Official source
- Warenwetbesluit Bereiding en behandeling van levensmiddelen (2024) — Official source
- WHO — Foodborne diseases estimates (2024) — Official source
Food Standards Agency (FSA) — https://www.food.gov.uk
The HACCP standards shown in this application are for informational purposes only. KitchenNmbrs does not guarantee that displayed values are current or complete. Always consult the FSA or your local authority for the latest regulations.
Written by
Jeffrey Smit
Founder & CEO of KitchenNmbrs
Jeffrey Smit built KitchenNmbrs from 8 years of hands-on experience as kitchen manager at 1NUL8 Group in Rotterdam. His mission: give every restaurant owner control over food cost.
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