Topic · Restaurant Business Plan Mastery: From Concept to Execution
Income Statement
Objective: By the end of this lesson, you will be able to read and build a restaurant income statement. You will be able to:
- Lay out sales, cost of sales, gross profit, expenses and net profit.
- Calculate the key percentages, including prime cost.
- Use the income statement to spot problems early.
The structure
An income statement starts with sales and subtracts costs in layers until it reaches net profit. In restaurants, every line is also shown as a percentage of sales, because percentages let you compare months and benchmark against the industry. (Cost of food and beverage are usually shown as a percentage of their own sales.)
Example: Bistro 60, Month 1
| Income statement — Month 1 | Amount | % of sales |
|---|---|---|
| Food sales | $64,000 | 80% |
| Beverage sales | $16,000 | 20% |
| Total sales | $80,000 | 100% |
| Cost of food sold | $19,200 | 30% of food sales |
| Cost of beverage sold | $4,800 | 30% of beverage sales |
| Total cost of sales | $24,000 | 30% |
| Gross profit | $56,000 | 70% |
| Labour (wages, payroll taxes, benefits) | $26,400 | 33% |
| Rent and occupancy | $7,200 | 9% |
| Utilities | $2,400 | 3% |
| Marketing | $1,600 | 2% |
| Repairs and maintenance | $1,200 | 1.5% |
| Supplies (smallwares, cleaning, paper) | $2,000 | 2.5% |
| Insurance, licences, accounting | $1,600 | 2% |
| Card processing fees | $2,000 | 2.5% |
| Operating profit (EBITDA) | $11,600 | 14.5% |
| Depreciation | $2,000 | 2.5% |
| Interest | $1,000 | 1.25% |
| Net profit before tax | $8,600 | 10.75% |
The numbers that matter most
- Food cost % = cost of food sold ÷ food sales. Here: 19,200 ÷ 64,000 = 30%. Most full-service restaurants aim for roughly 28–35%.
- Labour cost % = total labour ÷ total sales. Here: 26,400 ÷ 80,000 = 33%.
- Prime cost = cost of sales + labour. Here: 24,000 + 26,400 = $50,400, or 63% of sales. Many operators aim to keep prime cost around 60–65%; above that, there is little left for rent and profit.
- Net profit % = net profit ÷ total sales. Here: 8,600 ÷ 80,000 = 10.75% — a strong result. Many full-service restaurants operate between roughly 3% and 10%.
How cost of sales is calculated
Cost of food sold is not what you bought — it is what you used:
Opening inventory + purchases − closing inventory = cost of food sold
That is why a monthly inventory count is essential. Without it, your food cost is a guess.
Using it
- Produce it every month, within two weeks of month-end.
- Compare each line with your budget and with last month. Investigate any line that moves by more than a point or two.
- Remember: profit is not cash. Depreciation is an expense that uses no cash, and loan repayments use cash but are not expenses. The cash flow statement explains the difference.