Restaurant profitability: five figures worth reviewing every week
High takings do not automatically mean high profit. Restaurant owners benefit from comparing sales, costs, settlements and cash on the same basis and over the same period.
These five checks are a starting point for a UK restaurant, café or pub. They are management tools, not universal industry benchmarks. Your menu, service model, accounting policies and operating period all affect interpretation.
1. Net sales and payment settlements
Start with a reliable sales figure excluding VAT, with cancellations, discounts, refunds and adjustments identified. Compare EPOS reports against cash taken and card or delivery-platform settlements. A card settlement may be net of processing charges or arrive a few days later; that difference is not automatically lost revenue.
2. Food and drink gross profit
Gross profit is net sales less the directly associated cost of goods sold. If you use opening stock and closing stock in your management accounts, the cost of goods consumed can be estimated as opening stock plus purchases less closing stock, adjusted for relevant transfers and wastage.
Gross profit percentage = (net sales − cost of goods sold) ÷ net sales × 100. Separate food and drink reporting can expose changes that are hidden in an overall average. Use a consistent basis and investigate large movements in wastage, purchases or selling prices.
3. Labour cost percentage
Compare payroll costs attributable to the trading period with net sales for the same period. Consider employer National Insurance, pensions and any other staffing costs relevant to your management accounts; be consistent from one report to the next.
Labour percentage = relevant labour costs ÷ net sales × 100. A labour percentage should prompt questions about rota planning and demand, not be treated as a target to cut staffing regardless of service quality.
4. Overheads and site contribution
Gross profit and payroll do not tell the whole story. Examine rent, utilities, repairs, subscriptions, merchant fees and other operating costs. For multi-site businesses, agree how central costs will be allocated; otherwise location comparisons can mislead.
5. Cash available to pay the next bills
Profit measures trading performance; cash measures payment timing. Check expected customer receipts against payroll, VAT, rent, suppliers, loan instalments and forthcoming stock purchases. If cash is tight, a rolling 13-week cash forecast can make the gap visible in advance.
A simple illustrative trading week
These figures are invented solely to demonstrate the calculations. They are not client results or a recommended industry target.
| Measure (excluding VAT) | Illustrative amount |
|---|---|
| Net restaurant sales | £20,000 |
| Food and drink cost of goods sold | £7,200 |
| Gross profit | £12,800 (64%) |
| Relevant labour costs | £6,400 (32% of sales) |
| Amount remaining before other operating costs | £6,400 |
If supplier prices rise or takings fall, both the gross-profit figure and cash payment dates may change. Review the assumptions and the underlying records before making staffing or pricing decisions.
How to turn the numbers into a useful routine
- Close each day's sales and compare EPOS, cash and card settlement records.
- Reconcile bank and supplier balances on an agreed timetable.
- Record stock movements, credits and material wastage where practical.
- Compare weekly net sales, product gross profit and payroll costs with the same period or budget.
- Discuss reasons for significant changes, assign actions and revisit the cash forecast.
Review the meaning of the numbers before comparing branches or periods. Differences in opening hours, sales mix and timing can be more significant than a single percentage.
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