Did you know that the average profit margin for the restaurant industry is between 2% to 6% globally? And for some food businesses, even achieving this low of a profit percentage can be a challenge.
Do you know what your profit is? How about how much money you are spending weekly, monthly, or yearly? It is imperative to know how to calculate restaurant profit and loss (P&L) if you want to be able to make it past your first year.
Check out this simple guide that shows you why it is important and how to calculate restaurant P and L with extra tips on how to maximize your profit.
What is a restaurant profit & loss statement?
A profit and loss statement gives you an overview of your business’s financial health. It is practically a report that includes the revenue and expenses over a selected time period.
You can create a P&L statement for a week, a month, a quarter, or a year. The data will help you realize if you are making a profit or if you should make changes to better your business model.
Why you must create a restaurant income statement
First of all, a restaurant income statement is a must for your accounting. In some countries, you are also mandated to legally file it. On top of this, calculating your restaurant’s profit and loss can help you:
- Create an accurate business plan: with clear goals and directions based on data from the previous year;
- Identify suspicious behavior: if any of the expenses don’t make sense, it may be a sign of theft and it should be investigated;
- Identify your star items: by monitoring your sales, you will notice which categories and menu items bring in the most money;
- Find new ways to increase profit: by comparing the revenue and expenses, you can find ways to spend less, maybe by changing suppliers or adopting a new type of service.
How to calculate restaurant profit and loss
To learn how to calculate restaurant profit and loss, you must first be aware of the items that are included in the statement:
- Sales
- Cost of goods sold
- Labor costs
- Operating costs
- Net profit or loss
Now, let’s see what each of them represents and what formula to use to get the final number.
Sales
Sales is the total revenue you earn over a specific period. If you only want a general view, you can just list the total amount of Sales in the restaurant income statement. But if you want to see the details and identify your best-sellers, split it up into categories, such as:
- Food
- Non-alcoholic beverages
- Alcoholic beverages
Or focus on the type of service:
- Dine-in
- Online ordering
- Pick-up
To get this valuable data, you need to use two main tools at your restaurant:
- A POS system: this will compile all the data from each order, so you can have an overview for the desired period. For example, GloriaFood POS will give you access to net sales, order types, offered discounts, menu item sales, and much more.
- An online ordering system: to monitor your number of online sales, the revenue you generate, the average order value and identify your most sought-after dishes. Good news: the online ordering system from GloriaFood allows you to see all of the above plus data about your website’s health. And not only is it free, but it also only takes 10 minutes to install on your website.
Cost of goods sold
The cost of goods sold represents the expenses that occur when you prepare a menu item, both for the ingredients and the kitchen labor.
Read more: Restaurant Food Costs: How to Manage the Rising Inflation without Losing Customers
The formula used for calculating Costs of Goods Sold is:
While you should also include this general metric for all dishes, you should also split it up and calculate the COGS for each menu item. This will allow you to identify the high-profit margin ones and the ones that should be updated because they are too expensive.
Labor costs
For labor costs, you must add all the wages you pay for staff that doesn’t work in the kitchen, preparing menu items. Therefore, list the following categories in your labor costs: restaurant managers, janitors, cashiers, servers, dishwashers, and hostesses.
Read more: 5 Tips on Efficient Management of Restaurant Labor Costs
Operating costs
Your operating costs, also known as overhead costs, represent the expenses that you pay even if your restaurant is not open, such as:
- Marketing
- Rent
- Utilities
- Technology
- Fees
- Permits
- Maintenance
If you want to know how to calculate restaurant profit and loss, you should list each item that adds up to the whole operating costs, so you can get a better view of where your money is going.
Read more: How to Calculate & Reduce Restaurant Overhead Costs
Net profit or loss
By subtracting all the costs from your sales, you will be left with either a positive number or a negative one. If it is positive, that is the amount of profit you made during the selected period. If it is negative, that is how much you lost during that time.
Do you want to know how to calculate restaurant profit and loss? Use these formulas:
Sample P&L statement for restaurant
If you want to know if your restaurant is succeeding or failing, start by using this restaurant profit and loss template. We’ve used random menu item examples that you can replace with the ones that you serve at your restaurant.
| Profit and Loss Statement | Selected period of time |
| Total Sales | |
| Dine-in | |
| Online Ordering | |
| Pick-up | |
| Cost of Goods Sold | |
| Pizza | |
| Burgers | |
| Desserts | |
| Labor costs | |
| Servers | |
| Restaurant managers | |
| Cashiers | |
| Operating costs | |
| Rent/Mortgage | |
| Utilities | |
| Technology | |
| Marketing | |
| Fees | |
| Maintenance | |
| Gross Profit | |
| Net Profit/Loss |
3 Simple tips to improve restaurant profit
Now that you know how to calculate restaurant profit and loss and you’ve created your statement, you are surely on the lookout for tips to increase your net profit. Implement these three measures that will have an immediate effect on your sales.
Read more: 7 Crucial Steps to Increase Restaurant Profitability
Engineer your menu
Your profit is directly dependent on your menu. If it is too long, too boring, or too pricey, you will not get many new customers, no matter how good your food is. Here is how you can engineer your menu to maximize your profit:
- Keep it short: less inventory means less money wasted and a small menu allows you to focus on creating quality dishes that customers will appreciate;
- Use professional pictures: to tempt hungry and undecided customers to order. Sometimes, words are not enough to describe a menu item, and the image will be the final decisional factor;
- Make it responsive: if you want to increase the number of online orders, don’t make people download PDFs and call you to place orders. Instead, use a responsive menu fully integrated with an online ordering system to make the ordering process as simple as possible.
Read more: 9 Menu Engineering Design Tips & Secrets That Will Boost Your Sales
Add promotions to your menu
An easy way to skyrocket your profit is to get people to spend more at your restaurant. Here are a few promotion ideas that will help you increase the average order value:
- Free dessert for orders over $60: people dining in will be tempted by the sweet treat and they might just add an extra side dish or appetizer so they can also enjoy dessert;
- Free delivery for orders over $70: to also get the people ordering online to add more items to their cart to forego the delivery tax;
- Combo meals: even though customers may not intend to buy so much food, a combo meal is perceived as good value for money, so they will often opt for it.
If you want to set up the above restaurant promotions and more in just a few seconds, use the Promotions module built into the online ordering system from GloriaFood:
Establish an unforgettable online presence
A proven way to increase the profit is to get more new and return customers. But the trick is to do it with as little investment as possible. Here is what you will need:
- A sales-optimized website: use the cheap, yet powerful restaurant website builder from GloriaFood to generate a sales and SEO-optimized website that will rank you high in searches where many potential customers will find your irresistible food;
- An active social media presence: tempt people with mouth-watering pictures of your food and always reply to comments and messages. Don’t forget to add direct links to your menu to allow customers to order in just a few clicks.
- An updated Google Business Profile: complete your profile with information such as correct working hours, exact address, link to the website, available services, and many convincing pictures of your menu and interior;
- Many positive reviews: grow your reputation by persuading customers to leave a good review on the review sites active in your area such as TripAdvisor and Yelp;
Read more: The Importance of Online Reviews for Restaurants & How to Get More
Final words
You no longer have to wonder how to calculate restaurant profit and loss because this guide includes all the necessary steps. If you notice your profit is not what you have hoped for, start applying the useful tips to maximize profits and you will see results in no time.
