Dec 1, 2025
Use this restaurant profit and loss example to understand your numbers and improve profits
After a grueling service, the last thing you want to do is stare at a spreadsheet. But your Profit and Loss (P&L) statement is the single most important report for understanding your restaurant's financial health. Think of it as the story of your business over the last month.
A P&L doesn't just tell you if you made money; it tells you how. It’s the story behind a packed Friday night or a sudden spike in produce costs. Understanding it is the difference between guessing and knowing. The P&L organizes all your financial activity into a clear flow. For a full picture, it helps to start by understanding the accounting basics, including profit and loss and balance sheet reports.
Every line on your P&L connects to a real-world action in your restaurant. Once you know how to break it down, you can pinpoint where your money is going and find opportunities to get leaner. This guide will show you how to:
A P&L statement moves you from reacting to problems to proactively shaping your restaurant's future. Let's walk through a complete restaurant profit and loss example.
A P&L shows where your money comes from and where it goes for a specific period—like a month or a quarter. It flows from top to bottom: you start with revenue, subtract all your expenses, and what’s left is your profit.
This simple breakdown is the foundation for every critical decision you'll make. Let's walk through each line item on a typical restaurant profit and loss example.
This is your top line, representing every dollar your restaurant brought in before any bills were paid. Most operators break this down into:
Tracking these separately helps you spot trends. Are cocktails crushing it while wine sales lag? This is where you find those clues.
Right under revenue is the Cost of Goods Sold (COGS). This is the direct cost of ingredients and beverages you sold. COGS is a variable cost—it rises and falls with your sales volume. The calculation is:
Beginning Inventory + Purchased Inventory - Ending Inventory = COGS
A low COGS percentage means you’re managing purchasing and portioning well. A high percentage can be a red flag for waste or theft. For a deeper dive, read our guide on mastering restaurant food cost to boost profits.
Industry Benchmark: Most restaurants aim for COGS between 28-35% of total sales.
Subtract COGS from Total Revenue to get your Gross Profit. This is how much money is left to pay for everything else—your team, rent, and marketing.
Gross Profit = Total Revenue - COGS
Think of Gross Profit as a quick health check on your menu's profitability.
This covers all other costs of keeping the lights on.
Labor is almost always your biggest expense after COGS. It includes:
Industry Benchmark: Labor costs should ideally be 25-35% of sales, but this varies by service model.
Your Prime Cost is your COGS plus your labor costs. It's the most important number on your P&L because it combines your two biggest controllable expenses.
Prime Cost = COGS + Total Labor Costs
Smart operators work to keep this number in check. If your Prime Cost creeps above 65%, it's a warning sign that your profitability is at risk.
This is a catch-all for everything else needed to run the restaurant:
Finally, the bottom line. After subtracting all operating expenses from your gross profit, you arrive at your Net Profit (or loss). This is what you actually earned. The average restaurant profit margin is squeezed down to just 3-5%, which shows how critical it is to understand every line on your P&L.
Your restaurant's P&L isn't one-size-fits-all. A pizzeria's financials look completely different from an upscale bistro. Comparing a restaurant profit and loss example from different models helps you set realistic goals. Your business model shapes your cost structure.
Think of a taco shop or coffee counter. Speed and volume are key.
Now, picture a sit-down restaurant with hosts and servers. The guest experience requires a bigger team.
This visual shows that even with the same revenue, the split between food and labor creates two different financial pictures. Knowing your model's strengths is the first step to improving your bottom line. Our guide to restaurant profit margins has benchmarks for your type of operation.
You don't need an accounting degree to build a P&L. It's about creating a simple, repeatable habit. The goal is a clean financial snapshot every week or month using data from your POS, supplier invoices, and payroll records.
The power of a P&L comes from consistency. Once you have a routine, you can compare week-over-week performance and spot trends that hit your bank account.
For a complete picture, it's a good idea to learn how to prepare comprehensive financial statements, which include your balance sheet. Our free restaurant profit margin calculator can also help you quickly check your numbers.
Your P&L is a diagnostic tool that shows where you're bleeding money. The real work begins when you use it to spot problems and make fixes.
This is about plugging the small leaks that add up over time with practical, immediate actions.
Regularly scanning your P&L helps you notice numbers that feel wrong. Here are common trouble spots:
Finding the problem is half the battle. Next, put a solution in place.
If high food costs are the issue, compare invoices from suppliers. Did the price of chicken wings jump 15%? It might be time to renegotiate or feature a more profitable appetizer. If portioning is the problem, retrain the kitchen team with scales.
The restaurant industry has seen growth, but inflation and supply chain issues make profitability a struggle. You can find more insights in these restaurant industry statistics on dojobusiness.com. By turning your restaurant profit and loss example into an action plan, you can diagnose issues and implement fixes that protect your margins.
Here are straight-up answers to the questions we hear most from independent operators.
At a minimum, review your P&L monthly. This gives you a high-level view and helps catch trends. But the operators who are really on top of their numbers run a simplified P&L every week. A weekly check-in lets you react instantly to a jump in avocado prices or unplanned overtime.
The industry average is 3-5%. A "good" margin depends on your model. QSRs can succeed on the lower end due to high volume, while FSRs can often push margins above 10%. The goal is to consistently improve your own margin month after month. A reliably profitable restaurant, even at 4%, is a business built to last.
This is a classic cash flow puzzle. Your P&L tracks profitability on an accrual basis—it logs revenue when earned and expenses when incurred, not when money actually moves. A P&L shows if you're profitable on paper but ignores cash movements like loan payments, equipment purchases, or owner draws. You have to look at your P&L and your Cash Flow Statement together.
Getting this right is critical.
Prime Cost reflects your biggest controllable expenses. Successful restaurants keep their Prime Cost under 60-65% of total sales. If you track one number to gauge your day-to-day operational health, this is it.
Ready to stop guessing and start knowing your numbers? Peppr's POS system is designed by restaurant people, for restaurant people. It gives you instant access to the sales and labor data you need to build an accurate P&L, helping you make smarter decisions that boost your bottom line. Learn more about how Peppr can put you in control of your profits.
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