When managing multi-location restaurants, it can be difficult to tell which locations are thriving and which are draining funds. Analyzing the restaurant profit and loss statement for each location can give you a clear window into what’s working, what’s not, and where to act.

A restaurant’s profit and loss statement is one of the most important financial documents an operator can have. It details the total revenue gained and expenses incurred for one location during a specific period. It includes key metrics you need to understand to control costs and run a profitable restaurant. In this guide, you’ll learn how to read a profit and loss statement, what to look for when analyzing one, and how to use that information to make smarter decisions across every location.

 

Restaurant P&L Example

 

A restaurant profit and loss statement, sometimes referred to as a restaurant income statement, is a key tool for any owner or manager. The failure rate for restaurants is high, but implementing strong financial management practices, such as regularly reviewing P&L statements, can prevent restaurant failure.

Before we dive into how to read a restaurant P&L, let’s look at an example, so you can visualize it as you learn. Our restaurant P&L example covers a single restaurant location for one month. The first section of the restaurant’s P&L statement is Sales. This includes all money coming into the restaurant during the specified time period. A good P&L will break down revenue into categories, such as food, wine, beer, liquor, and non-alcoholic beverages.

The next three sections of a restaurant P&L cover expenses or money going out of the restaurant: Cost of Goods Sold (COGS), labor costs, and operating costs. These are also broken down into specific categories. The final section is for Net Profit/Loss. It’s calculated by subtracting total expenses from total revenue for the given period.

an example of a restaurant profit and loss statement

How To Read And Analyze A Restaurant P&L

You will want to analyze your restaurant’s P&L weekly to ensure all revenue and expenses are tracked accurately. Make sure to clearly label each P&L with its reporting period. Some P&Ls include year-to-date totals and multiple months of data, so you can compare your restaurant’s profit and loss over time.

Read each section individually before comparing sections and calculating metrics. Analyzing the sales section allows you to analyze specific menu items and optimize the menu offerings and pricing to increase sales. The labor cost section can provide insights into improving customer service and scheduling efficiency, while the COGS section can guide inventory control. Your restaurant P&L should also show the percentage of sales for each expense category. You can use these numbers to identify which controllable costs can be reduced for the most significant impact.

After reviewing each section of the P&L, look for trends and seasonal fluctuations that could help you accurately forecast sales and signal operational problems or opportunities. Compare your restaurant’s profit and loss at each location and across locations to fully manage the financial health of your multi-location enterprise. You can even compare regions using P&L statements.

Key Metrics To Analyze From Your Restaurant P&L Statements

For restaurant enterprises, important financial metrics are derived from a restaurant’s P&L. Before reviewing your P&L metrics, set benchmark targets based on industry standards so you can quickly tell whether your restaurant is performing as expected. You can see examples of these metrics in the restaurant profit and loss statement example above.

  • Prime cost: This is the total of COGS and labor costs. It makes up the bulk of your restaurant’s costs. A solid benchmark to aim for is 55-65% of total sales. Lowering prime costs is a good way to increase your net profit.
  • Food cost percentage: This metric measures food costs relative to sales. Divide the total COGS by the total sales, and multiply by 100. The industry standard is about 28-32%. A lower food cost percentage means higher profits.
  • Labor cost percentage: Similar to food cost percentage, this metric compares labor costs to total sales. You calculate it by dividing total labor costs by total sales, then multiplying by 100. The average labor cost percentage for restaurants is 25-35%.
  • Profit margin: This metric is calculated as net profit divided by total sales over a given period, multiplied by 100 to express it as a percentage. A healthy profit margin is 3-5% for full-service restaurants and 6-9% for quick-service restaurants. If you operate a fast, casual restaurant, aim for a profit margin in between these two ranges.

Regularly tracking these metrics helps restaurant owners measure efficiency, benchmark performance, and improve profitability. You can use insights from your restaurant P&L to make data-informed decisions. Creating a data-driven action plan can help you boost profits. This should involve setting targets for your P&L and regularly checking your progress to see whether you’re meeting them.

Diagram of How Cash Management with ICL Works

Simplify Your Restaurants’ Cash Handling With ICL’s CashSimple® Cash Management Solution

When operating a multi-location restaurant enterprise, it can be tempting to stay focused on the big picture. While this is important, remember that each location has its own financial story to tell. You will need to read and analyze each location’s restaurant profit and loss statement individually, then compare them to maintain a thriving operation.

Understanding how to read a P&L is just the beginning of gaining control over your cash. Strong restaurant cash management is crucial to optimizing expenses and maximizing profits. When you have multiple locations spread across cities, states, or the country, cash management becomes increasingly complex.

ICL’s CashSimple® is a modern solution built for multi-location restaurant operators who need more than a spreadsheet. It automates key cash handling processes, reduces shrinkage, and delivers real-time visibility into cash flow across every location, so you spend less time chasing discrepancies and more time making profitable decisions. Key metrics are automatically calculated and delivered in easily digestible reports.

Schedule a demo to see how ICL can help you transform your restaurant’s cash management system.

FAQs

What Is A Restaurant Profit And Loss Statement?

A restaurant profit and loss (P&L) statement summarizes revenue, expenses, and profitability over a specific time period. Restaurant P&Ls help owners evaluate financial performance and make informed business decisions. In a table, they outline sales, cost of goods sold, labor costs, operating costs, and depreciation over a specific period. Then, they display a net profit/loss for this period.

Sales

A restaurant income statement starts by outlining all sales, including all money coming into the location from revenue streams. This may include income from special events and catering fees. Sales on the restaurant P&L statement are usually broken down into categories such as food, non-alcoholic beverages, liquor, beer, and wine. Tracking sales trends and breaking them down by category helps restaurant owners identify growth opportunities and understand customer behavior.

Cost Of Goods Sold (COGS)

COGS represents the direct costs required to produce menu items, including ingredients, condiments, beverages, and packaging. On the P&L, COGS are usually listed in categories that match the sales categories for easy comparison. To calculate COGS, good inventory control is key. Monitoring COGS helps restaurants control supplier pricing, optimize portion sizes, and maintain healthy profit margins.

Labor Costs

Labor costs include wages, payroll taxes, benefits, and overtime. They are one of the largest expenses for restaurants, making it essential to track them. On a restaurant P&L, labor costs are often broken down into hourly wages, salaries, payroll taxes, and employee benefits. Comparing labor costs to total sales helps operators determine staffing efficiency and maintain profitability.

Operating Costs

Operating costs are all the ongoing expenses required to run a restaurant that are not directly tied to food production or labor. Examples include rent, utilities, insurance, marketing, technology, and maintenance. It also includes any supplies needed for the kitchen or cleaning staff. Because they span departments and projects, it can be hard to get a full picture of your operating costs without categorizing them in your P&L statement. Controlling these costs is essential for sustainable operations.

Net Profit/Loss

Net profit or loss is the final figure that shows whether a restaurant earned or lost money during the reporting period. It is calculated by subtracting all expenses from total revenue. Net profit or loss is a key indicator of overall business health. While the goal is always to turn a profit, experiencing loss for a specific period is not necessarily cause for panic. Instead, it may be an opportunity to focus on improving your restaurant’s operational efficiency. This may look like targeting costs at specific locations or company-wide.

Depreciation

Depreciation is the gradual reduction in value of long-term assets such as kitchen equipment, furniture, and restaurant build-outs. Unlike the cost sections of the restaurant P&L, this section does not represent actual cash leaving your bank account. However, it’s still important to track regularly to understand the true cost of operating a restaurant over time. Depreciation should be taken into account when calculating net profit and annual tax write-offs.

How Often Should You Update Your Restaurant P&L?

Many restaurant operators update their P&L statements weekly or monthly. Frequent updates help restaurant owners catch financial issues early, before they become bigger problems. They also may lead to faster operational decisions, which is key in the fast-paced, volatile restaurant industry. Monthly reviews allow you to monitor trends and make data-driven decisions to optimize spending and boost profits.