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Restaurant Profit and Loss Statement Explained

Restaurant Profit and Loss Statement Explained

Last updated on 1/26/2021

While there are several ways to measure and ensure the success of your restaurant, the best way to understand your restaurant’s financial progress is with a restaurant profit and loss statement. Also known as a restaurant P&L statement, this financial tool reflects your sales and costs during a specified period of time. To better understand your business’s growth, see our guide below to create and interpret your own restaurant profit and loss statement.

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What Is a Profit and Loss Statement?

A profit and loss statement (or income statement) is a monetary statement that lists the sales, costs, and expenses of your business in a set period of time. For a restaurant, this financial statement enables you to analyze your restaurant's financial progress. You'll be able to see exactly where your restaurant is making or losing money, so you can take the necessary steps to improve your bottom line.

How Often Should You Update Your Restaurant P&L Statement?

Restaurant profit and loss statements can be used weekly, monthly, or yearly. Weekly statements are recommended so you can keep track of what is most profitable or costly to your establishment each week. This allows you to quickly make changes, such as implementing strategies to lower food costs, that will ensure your restaurant's financial success. Many restaurants will also use monthly and yearly restaurant profit and loss statements to show overall progress.

What is Included in a Profit and Loss Statement?

hands holding pen and typing in calculator

A restaurant P&L statement usually includes the following 5 main sections:

  1. Sales Breakdown
  2. Costs breakdown: Cost of goods sold (COGS)
  3. Labor Costs
  4. Operating Costs
  5. Net Profit or Loss

P&L statement also enables you to calculate food cost percentage, gross profit, and net profit or loss. These metrics can be calculated from your sales, COGS, and costs, and they allow you to fully understand your restaurant's financial state.

Restaurant Profit and Loss Statement Breakdown

Here, we go through what is included in a restaurant income statement in detail.

Section 1: Sales

In this section, you should list out all of the items that contribute to your total sales. This will include the products from all of your revenue streams and how much money each specific item has brought in.

Section 2: Costs

In this section, include a list of all of your restaurant's expenses with a cost of goods sold analysis. The cost of goods sold (COGS) is the total cost of your food and beverage inventory for a given time period. You can list out each individual item using your existing inventory system, calculate the cost of each product, and add them up to get your total COGS. Later, we will go through the equation for COGS and other useful restaurant calculations.

Section 3: Labor Costs

female servers smiling in a cafe

From your head chefs to your bussers, salaries and hourly wages for all employees make up your restaurant labor cost. The key element to controlling your restaurant labor cost is to understand how many employees you need to provide consistent and effective service without scheduling too many people.

Section 4: Operating Costs

Restaurant operating expenses include everything involved in your daily operations, such as supplies, repairs, and marketing. You can include occupancy expenses here or choose to make a separate section. Occupancy expenses include overhead costs and everything related to occupying a space, such as rent, insurance, utilities, taxes, and waste removal. Some of these expenditures, like waste removal, may be fixed, whereas others, such as your gas bill, may vary.

Section 5: Net Profit/Loss

In this final section, insert the results of your calculations and see how your restaurant performed over the designated period of time. Add up your costs (COGS, Labor, Operating) and compare it to your total income. Ideally, you'll end up with a profit. If you get a negative number, you're in the red, which means you're spending more than you're bringing in. You'll need to adjust your budget at that point to ensure that your next pay period ends in a profit or else you may not be able to sustain your business in the long run.

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Restaurant Profit and Loss Template

It's a good idea to create your own restaurant profit and loss template so you can customize it to your unique costs. The table below is an example of what your P&L may look like. You can also use our free downloadable profit and loss statement template by clicking the button below.

Download Interactive Profit and Loss Excel Sheet

Restaurant P&L Table

Restaurant Profit and Loss Statement, January 2021
Sales Week of Jan 9 Week of Jan 16 Week of Jan 23
Food 10,500 9,000 11,000
Wine 2,000 1,750 2,750
Beer 1,250 1,500 1,750
N/A Beverages 1,500 1,500 1,250
Merchandise 750 1,250 1,000
Catering 1,000 1,000 0
Add all amounts from food and beverage sales to get your total revenue per week.
17,000 16,000 17,750
Food 3,500 2,750 3,750
Wine 800 600 900
Beer 400 500 550
N/A Beverages 250 250 200
Merchandise 300 500 400
Catering 500 300 0
Total COGS
Add all numbers in COGS from each week to get this number.
5,750 4,900 5,800
Gross Profit
Subtract Total COGS from TOTAL for that week to get Gross Profit.
11,250 11,100 11,950
Labor Cost 3,750 3,500 4,000
Operating Costs
Miscellaneous 200 100 150
Rent 600 600 600
Utilities 400 400 400
Property Tax 150 150 150
Waste Removal 75 75 75
Insurance 125 125 125
Equipment Repairs 50 0 0
Total Operating Cost
Add all numbers in Operating Costs from each week to get this number.
1,600 1,450 1,500
Net Profit/Loss
Add Labor Cost and Total Operating Cost for that week; subtract that number from Gross Profit for that week to get Net Profit/Loss.
5,900 6,150 6,450

Restaurant Calculations for Your P&L Statement

Several restaurant calculations can help you create your profit and loss statement and glean important information from it. Below we go through how to calculate the cost of goods sold, food cost percentage, total gross profit, and net profit.

Metric What is it? Equation Example
Cost of Goods Sold (COGS)
  • The cost to your restaurant of the food, beverages, and any other products sold in a given time period
  • Also known as cost of usage or cost of sales
Beginning Inventory + Purchases – Ending Inventory = COGS $4,000 (beginning inventory) + $3,000 (purchased inventory over the week) - $1,250 (ending inventory) = $5,750 (COGS)
  • Repeat for every product individually or add up your inventory at once to get your total COGS.
Food Cost Percentage
  • The portion of sales spent on food
  • Average food cost percentage ranges from 25-35%
Total COGS / Food Sales = Food Cost Percentage $5,750 (Total COGS ) / $17,000 (Food sales) = 33% (Food Cost Percentage)
Gross Profit
  • The profit made from your sales after deducting the cost of goods sold
  • Can be thought of as a preliminary profit because it only takes into account sales and goods
Total Sales – COGS = Gross Profit $17,000 (Food Sales) - $5,750 (Total COGS) = $11,250 (Gross Profit)
Net Profit/Loss
  • The actual profit or loss after all expenses are deducted from sales
  • Also known as the bottom line, net income, or net earnings
Gross Profit – (Labor Cost + Operating Costs) = Net Profit/Loss $11,250 (Gross Profit) -($3,750 +$1,600)(Labor Cost + Operation Cost) = $5,900 (Net Profit)

Customize Your Restaurant P&L Statement

A restaurant P&L is customizable to your needs, so it is wise to avoid relying on another restaurant's profit and loss statement as an example to follow. Yours can be as rudimentary or elaborate as you like. Additionally, you can break down your operating expenses into smaller sections, such as occupancy expenses and marketing. Either way, your P&L statement will be most helpful to your business if it includes the precise costs and gains uniquely relevant to your establishment.

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With precision and organization, you can be well on your way to creating an accurate profit and loss statement. Understanding your financial progress allows you to forecast sales, discern your restaurant's limitations, and ultimately grow your business.

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