Restaurant Profit and Loss Statement: A Complete Guide

A comprehensive understanding of your business finances is vital to the success of your restaurant. By better understanding them, you can ensure you’re avoiding unnecessary losses and gain greater awareness of what is driving the most profits. 

A profit and loss (P&L) statement is a key document that provides an accurate overview of your revenue, operational costs, and gross profit. With this knowledge, you can make significant improvements and streamline your services. 

In this guide, we’ll fill you in with everything you need to know about restaurant P&L statements and how you can use them to optimise your business.

What is a restaurant profit and loss statement?

A restaurant profit and loss statement is a financial document that fully details your restaurant's revenue as well as its business expenses. 

A restaurant P&L statement is distinct from a cash flow statement, as a cash flow statement will include more comprehensive financial information about your business. For example, it includes information about external financing or debts being paid off.

A restaurant profit and loss statement provides vital insight into your restaurant’s financial health  and helps you decide how to optimise operations. It includes the key information you need to make your business as efficient and profitable as possible.

What is included in a restaurant profit and loss statement?

A thorough restaurant profit and loss statement offers a full analysis of your restaurant’s finances, from sales to operating expenses. For more information on these individual areas, check out our complete guide to restaurant finance management.

A restaurant profit and loss statement includes the following:

Revenue

The revenue section of a restaurant P&L statement includes all your income items. That includes food and beverage sales, as well as other revenue your restaurant earns through means like in-store advertising.  

Revenue is a complete summary of your income in the statement. It’s a critical piece of information to keep in mind when reviewing the rest of the statement. 

To help create a profit and loss statement, it may be helpful to create a separate restaurant income statement to itemise all your revenue.

Cost of goods sold

The cost of goods sold (COGS) covers the cost of the inventory and materials you have used to create your dishes or other products. Your COGS can be subtracted from revenue to determine what your gross profit is.

COGS primarily consists of food costs, as well as drinks and other money spent on the revenue drivers of your business.

For instance, if your COGS for a dish is £10 and you sell it for £25, your gross profit will be £15. A thorough review of your COGS will allow you to determine if your menu’s sale prices are covering production costs.

Your COGS can be added to your labour costs to identify your prime cost. This is a key financial metric to monitor as it is a huge percentage of expenditure for restaurants.

Gross profit (or loss)

Gross profit is the total revenue you’ve made from sales, minus your COGS. It’s an important metric to properly understand the financial viability of your business.

If the resulting figure is negative, it is a gross loss. Gross profits or losses make it clear in your profit and loss statement if you are maintaining a healthy cash flow, and if it is enough to offset your costs.

Net profit (or loss)

Your net profit or loss is how much of your income is left over after all expenses have been accounted for.

This is arguably the key figure of any profit and loss statement. It’s the amount of money you have left to reinvest in your business or to pay out to the venue’s ownership.

Read more about restaurant financial terms here.

Operating expenses

Operating expenses are the costs you incur by operating your business. Within your profit and loss statement, operating costs will include labour costs, utilities, marketing expenses, and other general costs of running your venue. 

Fully examining your operating costs is an effective way to find your problem areas and identify where your business could improve.

Once you’ve identified ways to boost your operational efficiency, a table management system like ResDiary is the perfect tool to help you do it. ResDiary enables you to automatically control your flow of bookings including the order tables are sold in. You can also set rules that determine things like when tables can be short-sold, and when they can’t.

It’s a vast improvement over a pen and paper diary thanks to a wide range of automated table management features.

Check out our ResDiary value calculator to find out how much time and money you could save by making the switch.

Occupancy expenses

Occupancy expenses refer to the costs you are paying related to your property. Occupancy expenses can include mortgage interest, rent, council rates and land taxes.

Most items in an occupancy expense list are fairly difficult to alter. However, with a profit and loss statement, you can ensure that all your expenses are accounted for and you have a clear picture of your finances.

Depreciation

Depreciation refers to the lost value relating to the natural wear and tear or degradation of your property or restaurant equipment. Degradation can result in your business incurring a loss as kitchen equipment or parts of your property deteriorate and requires repair. 

Depreciation is a complex financial concept and could affect your business in a number of different ways. Consult with a financial expert when creating your profit and loss statement to understand exactly how it relates to your business.

How to use a restaurant P&L statement

By completing your profit and loss statement, you have clear and actionable data to improve your restaurant. Use your profit and loss statement to:

• Confirm total costs: A restaurant profit and loss statement is the perfect way to examine the totality of costs in your venue. It’s possible for hidden costs to seriously pile up over time in your business. With a profit and loss statement, you have the chance to examine all aspects of your restaurant and discover all your expenses.

• Examine profit margins: Profit and loss statements provide a complex overview of your restaurant's finances so you can identify your profit margins and uncover areas to improve. For example, you might find your sales are too low to achieve a profit. Or, you might find your operational expenses in certain areas are bringing down your profit margin unsustainably. Then, you can take steps like using ResDiary’s commission-free booking solution to keep more money in your pocket, or relying on ResDiary’s built-in email marketing features to attract more customers.

• Find problem areas: By clearly looking through a restaurant P&L statement, you can review areas where you are dealing with bloated costs. For example, if your labour costs are a massive expense for your business, consider solutions like ResDiary’s Rotaready integration to generate more efficient employee schedules. This can reduce losses from overstaffing.

• Confirm growth goals: Your growth goals are manageable improvements to your income you are aiming to achieve over a selected period of time. By using a profit and loss statement, you can set goals, confirm if existing goals are possible, and begin using the data to find the best ways to achieve them. 

Improve your restaurant's profitability with ResDiary 

Once you’ve identified where your restaurant can grow, it’s time to implement a plan of action. With ResDiary, you can streamline your restaurant’s operations and take them to the next level. Give your team an easy-to-use tool to reduce admin tasks and find solutions to your unnecessary expenses. 

With clear access to vital booking data, your venue will be primed for optimisation and growth. ResDiary offers a broad array of integrations, providing additional assistance with EPOS solutions and a wide array of marketing tools.

Book a demo with ResDiary and take the next step towards your growth goals.