Your profit and loss statement tells you exactly where your money goes each month. Most restaurant owners get overwhelmed by the numbers, but it's straightforward: sales minus expenses equals your profit. Understanding these figures will transform how you run your operation.
What's in a profit and loss statement?
A P&L flows from top to bottom: you start with revenue and subtract all costs. What remains is your profit or loss.
💡 Example P&L restaurant:
- Revenue: €45,000
- Food cost: €13,500 (30%)
- Labor costs: €18,000 (40%)
- Rent: €4,500 (10%)
- Other costs: €4,500 (10%)
Profit: €4,500 (10%)
The most important cost categories for restaurants
Each expense category reveals something crucial about your operation. Here's what matters most:
Food cost (25-35% of revenue)
Your ingredient expenses. Hit 36%? You're probably losing money on every plate. Check portion sizes and supplier pricing immediately.
Labor costs (35-45% of revenue)
Wages, taxes, and benefits combined. Above 45% makes profit almost impossible. Examine your staffing levels and revenue per employee.
Rent costs (8-12% of revenue)
Fixed rent divided by monthly sales. Exceed 12% and your location costs too much for your volume. You need more customers or a cheaper spot.
⚠️ Watch out:
Always focus on percentages, not dollar amounts. €2,000 rent works at €25,000 revenue but kills you at €10,000 revenue.
Gross margin vs. net profit
Many owners mix up gross margin with net profit. The distinction matters enormously:
Gross margin = Revenue - Food cost
Shows what's left after buying ingredients. Aim for 65-75% of revenue.
Net profit = Gross margin - everything else
This is your actual take-home money. Target: 5-15% of revenue for restaurants.
💡 Example calculation:
Restaurant with €50,000 monthly revenue:
- Revenue: €50,000
- Food cost: €15,000
- Gross margin: €35,000 (70%)
- All other costs: €30,000
Net profit: €5,000 (10%)
Red flags in your P&L
These warning signs demand immediate action:
- Food cost above 35%: Your menu prices are too low or portions too large
- Labor costs above 45%: You're overstaffed or generating insufficient revenue per worker
- Shrinking gross margin: Supplier costs increased but you haven't adjusted menu prices
- Rising miscellaneous expenses: Small costs adding up to big problems
From tracking this across dozens of restaurants, labor cost percentage becomes the make-or-break factor during slow periods.
Monthly vs. annual figures
Always review both timeframes. Restaurants experience seasonal changes and monthly ups and downs are normal. But three consecutive months of red ink? Time for drastic changes.
💡 Practical example:
December: 15% profit (holiday rush)
January: -5% loss (post-holiday slump)
February: 2% profit (gradual recovery)
Average Q4-Q1: 4% profit - perfectly acceptable
How often should you review your P&L?
Monthly P&L reviews are the absolute minimum. But monitor these critical numbers weekly:
- Revenue vs. previous week/month
- Food cost percentage
- Labor cost percentage
Real-time cost tracking eliminates the wait for your accountant's monthly report and catches problems before they spiral.
How do you read a P&L? (step by step)
Start with revenue
Look at your total revenue and compare it with the previous month. Up or down? Also check revenue per day or per cover to spot trends.
Calculate your food cost percentage
Divide your ingredient costs by your revenue. Between 25-35% is standard. Higher? That's where your profit is leaking away.
Check your gross margin
Subtract food cost from revenue. This should be 65-75%. Too low? Your selling prices are too low or your ingredients too expensive.
Analyze labor costs
Divide labor costs by revenue. Above 45% becomes problematic. Look at revenue per employee and productivity.
Look at your net profit
After all costs: what's left? 5-15% is standard for restaurants. Less than 5%? You need to cut costs or raise prices.
✨ Pro tip
Calculate your break-even point within your first 30 days of operation. Know exactly how many covers you need daily to cover fixed costs - this number becomes your minimum daily target and prevents cash flow disasters.
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's a realistic profit margin for restaurants?
Net profit margins between 5-15% are industry standard, with 10% considered healthy. Anything below 5% puts you at risk during slow periods. Fine dining can sometimes achieve higher margins, while fast-casual typically operates on the lower end.
Why am I generating revenue but still losing money?
Your costs exceed your income - it's that simple. Food costs above 35% and labor costs above 45% are the usual suspects. These two categories alone can destroy profitability even with strong sales.
Should I panic if one month shows a loss?
Not necessarily - restaurants have natural fluctuations. Compare to the same month last year, not last month. Three straight months of losses signal real trouble, but one bad month might just be normal seasonality or a temporary setback.
📚 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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