Profit and Loss Statement (P&L)

A profit and loss statement (P&L), also called an income statement, is a financial report that summarizes a business’s revenue, costs and expenses over a defined period. In a restaurant, it shows how sales are converted into gross profit, operating profit and net profit and helps management understand financial performance.

Common sections of a restaurant P&L

• Revenue: food, beverage, catering and other operating sales, reported on a consistent net-sales basis.
• Cost of goods sold: food, beverage and other direct product costs.
• Gross profit: revenue less cost of goods sold.
• Labour: wages, salaries, payroll taxes and benefits according to the reporting format.
• Operating expenses: rent, utilities, repairs, marketing, insurance, supplies and administrative costs.
• Operating result and net profit: the financial result after the relevant expenses and other items are deducted.

Why restaurants use a P&L

A monthly P&L helps owners and managers monitor food cost, labour, prime cost, overhead, profitability and budget variances. Comparing periods can reveal changes in sales mix, supplier pricing, staffing efficiency and operating expenses.

P&L versus cash flow statement

A P&L reports income and expenses under the business’s accounting method. A cash flow statement tracks cash entering and leaving the business. A restaurant can report a profit while experiencing cash-flow pressure due to inventory purchases, debt repayments, capital expenditure or timing differences.

Chef’s tip: Compare actual results with budget and the same period in the prior year, then investigate the largest variances. Make sure sales, COGS and labour are classified consistently before drawing conclusions.

Key distinction: A P&L measures financial performance over a period; it is not a list of bank transactions or a direct measure of cash on hand.