How to Read Profit & Loss in a Restaurant
Ask most operators "is business good?" and they answer by looking at the cash in the till. But cash in the till isn't profit. It contains the supplier's money, the rent money, the tax money. Real profit is what's left after all of it is paid.
Reading the profit & loss statement is the only honest answer to "am I making money?" This guide breaks down the restaurant's books in plain language, line by line.
What Is a Profit & Loss Statement?
A profit & loss statement (P&L) sets the money you earned against the money you spent over a period. In its simplest form:
Net Profit = Revenue − (Ingredients + Labor + Fixed Costs)
Revenue enters at the top, costs are subtracted one by one, and net profit remains at the bottom. That's why net profit is called the "bottom line."
Restaurant P&L Line Items
| Item | What It Means | Typical Share of Revenue |
|---|---|---|
| Revenue | Total sales | 100% |
| Ingredients (food cost) | Raw materials into the kitchen | 28-35% |
| Labor | Salaries, social security, staff | 25-35% |
| Rent | Premises rent | 8-12% |
| Energy & supplies | Electricity, gas, water, packaging | 5-8% |
| Other | Tax, accounting, maintenance | 5-10% |
| Net profit | What stays in your pocket | 5-12% |
Golden rule: Ingredients + labor combined is called prime cost and should not exceed 60% of revenue. If these two run loose, profit melts no matter how low the rent is.
Which Number, How Often?
You don't need to read everything every day. Look at the right number at the right interval:
Every Day
- Daily revenue — what did I sell yesterday?
- Average per cover — what did each table leave behind?
Every Week
- Food cost ratio — what percent of revenue went to ingredients?
- Labor ratio — are shift hours balanced against sales?
Every Month
- Prime cost — are ingredients + labor under 60%?
- Net profit margin — what's left after all costs?
- Trend — is this month better or worse than last?
A Simple Example
A restaurant doing ₺600,000 monthly revenue:
| Item | Amount | Ratio |
|---|---|---|
| Revenue | ₺600,000 | 100% |
| Ingredients | ₺192,000 | 32% |
| Labor | ₺180,000 | 30% |
| Rent | ₺60,000 | 10% |
| Energy & supplies | ₺42,000 | 7% |
| Other | ₺48,000 | 8% |
| Net profit | ₺78,000 | 13% |
Here prime cost is 62% — slightly over the line. A 2% improvement in labor or ingredients directly grows net profit. The statement shows you where to push.
The 4 Most Common Mistakes
1. Confusing revenue with profit. "We did 600k this month" feels good but says nothing. What matters is what stayed in your pocket from that 600k.
2. Not paying yourself a wage on paper. If the owner's own labor isn't counted, the statement looks more profitable than it is. Set yourself a wage and book it as a cost.
3. Ignoring the season. Summer differs from winter, weekday from weekend. A single month's statement misleads; read the trend.
4. Hearing it once a year from the accountant. A loss learned at year-end can't be undone. Operators who read monthly catch the problem while it's small.
Automated P&L: Gurmion
Building this statement by hand every month is tedious — collecting invoices, entering revenue, calculating ratios takes hours. Gurmion does it for you:
- Reads sales and invoice data automatically and builds the statement itself
- Shows prime cost, food cost, and net profit margin in real time
- Compares this month with last, draws the trend
- Warns when a threshold is crossed ("labor passed 35%")
Works integrated with food cost and shrinkage tracking — every line comes from real kitchen data.
Frequently Asked Questions
Is P&L the same as cash flow? No. P&L answers "did I earn?"; cash flow answers "is there money in the till?" Even a profitable month can cause a cash squeeze if collections are late.
Why does prime cost matter so much? Because the two biggest items you can actually control are ingredients and labor. Rent is fixed, but you manage these two daily. The 60% line is the threshold of staying profitable.
What should my net profit margin be? In restaurants, 5-12% is normal. Above 15% is excellent. Below 5% means the margin is very thin and risk is high.
My accountant already keeps the books — isn't that enough? An accountant records the past; you manage the future. A monthly tax statement and a weekly operating statement are different things.
Try Gurmion for Free
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The P&L statement is the restaurant's X-ray. It may hurt, but it shows the truth. The operator who reads the numbers is always one step ahead of the one who runs on intuition.