Profit and Loss Statements for Restaurants

How much money are you actually making at your restaurant? That’s exactly what a restaurant profit and loss statement can tell you.

Let’s break it down by one of the most common menu items in the United States: Pizza. Popular restaurant chain Domino’s charges $17.99 for a large (14”) pepperoni pizza in the Boston area. But Domino’s doesn’t make $17.99 on the pizza. Every pie costs money in ingredients (flour, cheese, sauce, spices, pepperoni), labor (the average MA Domino’s employee makes $16/hour), and packaging (pizza box).

What’s left over after all of those costs is the profit on that particular pizza. And that doesn’t even include fixed costs like rent on the kitchen space, utility and heating, appliances, and other overhead.

Answering the question of how much money you’re making as a restaurant owner can get complicated fast. But whether you’re using a team of accountants or managing the books yourself, you’ll need to put together a profit and loss statement (often shortened to the phrase “P&L”) to tell you just that. Here’s everything you need to know about creating and reading one:

What Is a Restaurant Profit and Loss Statement?

A profit and loss statement provides a record of a restaurant’s financial health by outlining revenue, costs, and expenses during a set period of time — usually over a fiscal year, but it can be more frequent depending on your management style or if you’re part of a public company. Another word for a profit and loss statement is an income statement, because it shows your overall restaurant income for the year.

Your profit and loss statement goes into detail for each revenue and expense to determine your net income, or profit. Here’s the basic equation:

Profit = (Total Revenue + Gains) – (Total Expenses + Losses)

A good way to remember this is thinking back to the Domino’s example. At the end of a given pizza, how much of that $17.99 does the restaurant actually see? Profit is ultimately what your restaurant “pockets” at the end of the year after paying for restaurant space, food and beverage supplies, employee wages and tips, and other overhead, like linens, decor, or appliances.

Keeping up a regular P&L statement helps you assess your restaurant’s financial health so you know exactly what’s coming in and what’s coming out — so you can make sure your restaurant stays as profitable as possible.

How Often Should You Update Your Restaurant P&L Statement?

A P&L is one of the building blocks of your restaurant accounting and should be updated on a regular basis, though the exact timing is up to you. Because it’s a helpful snapshot of your restaurant’s financial health, many restaurant owners prepare one weekly or monthly. If you have multiple restaurants, you’ll want to create a profit and loss statement for each individual unit as well as your business as a whole.

Monitoring your P&L gives you insight into:

Whether or not your restaurant is profitable — which can take time
How to prioritize business decisions, like adding new menu items, changing suppliers, or hiring and staffing
Where your “money makers” are on your menu
Any inconsistencies or losses that don’t make sense, which is a sign of theft
At a minimum, it should be prepared each quarter as part of your quarterly taxes.

Many point-of-sale systems automatically generate P&Ls on an ongoing basis so you can see an updated dashboard of your performance.

What is Included in a Profit and Loss Statement?

Restaurant owners create P&L statements in one of two accounting methods: Cash and accrual.

The cash method is the simplest accounting method and focuses on money flowing in and money flowing out. Restaurants record transactions for every cover and record liabilities (expenses and losses) whenever bills come due.
The accrual method records revenue as it is earned, rather than when cash is received. This method is more common for businesses that provide services or products, such as retail or software, where customers order in advance before receiving payment.

These two methods differ on the specifics included in your profit and loss statement, and how far in the future you record sales and expenses. Which method you choose is up to you (and may be worth chatting with an accountant about.)

In both methods, however, profit and loss statements include each element that makes up profit:

Sales and revenues by category: Food, wine, liquor, merchandise, for example
Costs of goods sold (COGS) by category: Typically, how much it costs for your ingredients.
Labor: Wages, tips, and salaried employees
Incidental operating expenses: The types of costs that fluctuate, like advertising, miscellaneous repairs, administrative expenses like credit card fees, utilities, live music, and so on
Fixed costs: Monthly rent, insurance, and other overhead costs you cannot change or control
Depreciation: Over time, your assets, like appliances and restaurant equipment, depreciate in value. Calculate this cost using this formula.

Subtracting the sum of all of your costs (labor, operating expenses, fixed costs) from your sales and revenues will give you net profit.

Note that profit typically is calculated before taxes. Many P&Ls include an “income before taxes” line and then a line to calculate your taxes afterwards.

How to Create a Restaurant P&L Statement

Now, it’s time to put all of those elements together. Here’s an example of what a P&L statement could look like for a restaurant. You’ll want to make sure you include the categories and costs most relevant to you, but you can start with this template.

This example below takes a high-level approach, but it’s worth creating a detailed examination of at least your expenses, if not your revenue by menu item, at least once every quarter.

How to Analyze a Restaurant Profit and Loss Statement

Ok, here’s some bad news: The average profit margin for a restaurant is less than 5%. The restaurant industry has famously paper-thin profit margins, which is exactly why 60% of restaurants fail in the first year.

That’s exactly why creating a profit and loss statement is so helpful. Besides getting your books in order so you can accurately pay your taxes and manage your business, it’s the best way to understand the overall financial health of your restaurant.

Few restaurant owners sign up for this part of the deal. You’re likely passionate about food and creating deep, meaningful experiences for your customers — not crunching numbers. But taking a hard look at your profit and loss statement can help you balance your overall costs and make better business decisions, whether that’s looking at specific ingredients in season, choosing new table linens, or deciding whether or not to hire that extra server.

In addition to pulling together all of your revenue and expenses, your profit and loss statement will include several restaurant calculations to help you better understand your business:

Percentage of sales

The first area of your P&L to examine is your revenue by category (or if you’re getting detailed, your revenue by menu item.) To be able to make better decisions on your offerings and on your marketing and sales, you need to know exactly which categories perform well and which don’t.

For example, your wine list may be a powerhouse, making up the majority of your sales. If that’s the case, then highlighting your wine list in marketing materials, training your staff on your different wine offerings, or streamlining other drink choices that aren’t performing as well can help you optimize your revenue.

Gross profit = Revenue – COGS

Gross profit is the first measure of your business health. This is different from your final profit number at the end of your P&L. What this tells you is specifically how profitable your menu is — how much are you bringing in and how much is coming out based on your specific menu items and the cost of the ingredients to make them.

Knowing this allows you to start to dissect your menu to understand which items are worth keeping and which aren’t helping your restaurant grow. It’s also a good place to look at your suppliers and whether or not they’re contributing positively for your business. This might mean purchasing items in bulk or working with local suppliers that charge less for shipping or delivery.

Prime cost: COGS + Labor

Prime cost usually makes up 60% of your total costs. Calculating prime cost gives you a window into your two biggest expenses that you can (theoretically) control. You won’t necessarily be able to negotiate or change your rent, but you can change suppliers, menu items, and adjust staffing accordingly.

Restaurants typically have two levers to increase their profit: Increasing menu prices or decreasing their prime cost.

Net Profit = (Total Revenue + Gains) – (Total Expenses + Losses)

This is the big one! Your net profit is the overall profit that you’ve earned over the given time period. Ideally, this number is positive — often called being “in the black” — but for many restaurants, it takes years to reach profitability.

To increase your profit margin, you’ll need to look at both sides of the equation, increasing your total revenue and decreasing your total expenses.

What Comes Next? Improve Your Margins!

Of course, figuring out what your restaurant is important — but it’s what you do with that information that really matters. From rethinking your menu strategy to implementing new technology, there are countless ways to uncover new efficiencies and reduce costs, using your P&L as your guide.

(If you want to learn more about how digitizing tip payouts can save your team time, make them happy — and yes, improve those margins — get a demo here!)

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Restaurant Management

4 Ways to Save on Restaurant Labor Costs with Kickfin

In the restaurant industry, profit margins have always been tight — and these days, they’re only getting tighter.

Running a restaurant is a labor intensive business. You need a strong back of house team to push out food, front of house workers to greet and care for guests, and managers to keep everyone in check. Naturally, labor is one of the most significant expenses for restaurant operators. In order to keep costs reasonable for customers, even a slight overage on labor can break your budget — but thankfully there are levers you can pull to reduce labor costs.

If you want to secure your business’s financial future, you’re going to need to streamline scheduling practices and keep a close eye on labor costs… without frustrating employees who want more shifts.

Don’t worry: you can turn to traditional wisdom, sales forecasting, and emerging restaurant technology to make sure that you stay on budget.

Here are a few ways you can save on labor costs at your restaurant:

1. Rethink the schedule

Obviously, the most straight-forward way to cut labor costs is to reduce the number of people you schedule on a given night.

We get it — you don’t want to see hour-long ticket times and poor guest experiences. But you might not need as many folks on the line or servers on the floor as you think — at least, not all the time.

Staffing and scheduling isn’t a perfect science, but there are some tactics operators should test if they’d like to “right size” every shift — including:

Analyze your daily schedule. Don’t make assumptions about your peak times and slow periods. Analyze sales trends and let the data be your guide.
Anticipate seasonal trends. If you’re in a college town, don’t wait until your servers are twiddling their thumbs in July to implement a new summer schedule.
Let your seasoned staff shine. Your veteran employees likely thrive on those super busy nights when they’re running on pure adrenaline (and earning way more in tips). Consider giving more experienced workers more responsibility — assuming they’re willing and able — and you might be able to get away with fewer people on a shift here and there.

>> Learn about scheduling software that helps you manage labor and engage with employees

2. Assess and address productivity

Are you making the most of the team that you already have? There are a few ways you can identify your highest-producing employees and make the most of their success:

Evaluate employee performance. Most employees want to be successful; observe your team and analyzes things like sales per labor hour, table turnover rate, and tip volume to get a sense of your strongest players and those who could use more training (and bonus: this can reduce turnover and boost team morale)

Provide incentives. Create a fun bonus system that rewards strong performance and high levels of productivity. You can use data from the previous data point to set goals.
Cross-train employees. Training your staff to handle multiple roles – or hiring folks with vast service experience – offers flexibility for scheduling and can reduce your need for additional hires.

3. Don’t pay employees to wait for their tips

No, we’re not saying to cut all of your servers early (no matter how much they ask).

But, you can send your servers on their way much quicker when they don’t have to wait around for managers to count out cash tips. Once they’ve finished their sidework, servers can clock out and see their digital tips sent directly to their bank account, instead of hanging around on the clock waiting for the shift manager to do their check outs.

4. Prevent labor overages before they happen

Most restaurants simply can’t afford to pay overtime for staff. But sometimes your full-time staff creep toward 40 hours of work without anyone noticing…and suddenly you’re paying 1.5x what you expected for a single worker.

This, too, goes back to proper scheduling policies. Give yourself a bit of wiggle room for the employee who clocks in 10 minutes early or often takes a long time on sidework by never scheduling anyone for more than 38 hours each week.

5. Pay close attention to clock-outs

People make mistakes, and tired servers often leave their long double shift without clocking out for the night. Usually, they’ll realize their mistake and call the store to have someone clock them out (still adding extra time to their shift).

But sometimes, the clock keeps running all night, and no one notices until it’s time to process payroll. Two weeks later, your admin team is spending way too much time correcting clock-outs so that you don’t end up paying for 8 extra hours of work.

Try using technology that puts guardrails in place to prevent any clock-out mistakes before they happen. Kickfin doesn’t allow you to process and pay out tips until an employee is clocked out, so managers can make sure everyone is clocked out at the proper time.

(We also have some other exciting new features that can make your life easier!)

Not only can Kickfin help you reduce labor costs, but we’re ready to simplify your entire tip management process. Reach out to us to learn more about our instant tip calculations, integrations, and smarter tipping solutions.

Restaurant Management

How to Get Your Restaurant Ready for Football Season

Football is back! Whether you’re rooting for your alma mater or just hoping to see massive sales at your restaurant, it’s an exciting — but often stressful — time of year.

If your restaurant has at least one TV, you’re going to have some customers asking you to switch it to ESPN. And if you’re running a sports bar … it’s officially crunch time. Expect your tables to be full (and harder to turn) and your staff to be running on pure adrenaline as the restaurant fills up with fans hoping for a bite to eat.

You probably know the drill: hire more staff, add more servers to game day schedules, and manage your inventory with hungry fans in mind. But if you want to get the most out of football season, get game-ready for some of the busiest weekends of the year with our tips for a successful season.

Consider a game day menu

When your restaurant is at full capacity with hungry football fans, you might want to consider a limited menu for the weekends in order to keep wait times down. Shorten the food menu down to shareable apps, best sellers, and items with the simplest prep so that your kitchen isn’t lined with tickets at halftime.

At the bar, don’t limit your customers to certain cocktails — but consider the power of suggestion and list out some easy-to-batch cocktails that will keep your service bar out of the weeds.

**Make sure they can watch their game**

Is there anything worse than a group of die-hard fans walking in to see their team play — only to realize you don’t have the right subscription service to stream it? Next thing you know, some guy has commandeered the remote to sign into his YouTubeTV account.

Before that embarrassing situation arises, check your cable listings and subscription services to see if you’re missing any important channels. You’re probably going to need to upgrade in order to show games that aren’t carried in your market. Here are just a few channels you might need:

ESPN+
Hulu + Live TV
Peacock
NFL Sunday Ticket
YouTubeTV or cable
Netflix (yep — Netflix will be streaming a few NFL games this year)

If viewing options are limited, or you don’t have enough screens to air multiple games at once, make sure you’ve got a strong wifi connection (free, of course) so that your guests can watch on their phones — or more importantly, talk smack to their fantasy league.

Offer game day deals

Now that you’re logistically ready for the season, it’s time to draw in the customers. Make your restaurant the place for fans to gather by offering drink specials and deals on appetizers.

Leverage social media to get the word out about your game day deals. Consider paying to boost a post or running a giveaway for people who share a post about your game day specials.

Plan for Post-Game

You don’t want the restaurant to empty out as the clock runs down. Entice fans to stay and celebrate (or lick their wounds) once the game ends by extending deals. That could mean a discount for fans of the winning team or an extra-long happy hour.

Pay out your employees — quickly.

After a long game-day shift, your servers and managers are going to be more tired than usual. Let them head home early by using Kickfin to pay out tips instantly. We take care of all of the tip calculations and send tips directly to servers’ bank accounts in seconds, so your exhausted team members don’t have to wait to put their feet up and rest.

Want to see our instant digital tip outs in action? Get a demo of Kickfin today.

Hiring, Training and Retention, Restaurant Management

The Art of the Upsell: Teach Servers to Increase Average Check Amounts

You want to make more profit. Your servers want to make more tips. A crash course on upselling is a win-win for everyone.

Your servers might not realize it, but their words have a lot of power. Knowing how to present a higher shelf vodka or a premium side could make a world of difference for their wallets.

And beyond the increased checks, pro servers who are able to successfully upsell are also recommending your restaurant’s very best for guests. Those bigger ticket items are often your best dishes or most unique cocktails that will stand out in guests’ minds and make for an elevated dining experience.

Here are a few ways your servers can gently suggest some pricier upgrades that will boost their average check size, making everyone a few extra dollars.

1. Consider your memorable dining experiences

Before you dive into our upselling go-tos, take a minute to reflect on your last really good experience at a restaurant and how your server’s language, attitude, and knowledge affected your experience.

Did your server walk right up and ask if you want an appetizer? Or did they take the time to talk through specials, field questions about menu items, and give you the space you needed to make a decision?

Was your server’s demeanor generally excited and upbeat? Or did they actually look a bit disappointed when you said you’d just be having water?

These small, unspoken cues are what make or break a server’s night. Leading with confidence, positive energy, and genuine concern for your guests’ experience is what will build trust between server and customer, so they’ll be more open to suggested upgrades.

2. Value authenticity

Upselling just for the sake of a higher tip is not a successful strategy.

Remind your servers that while upselling can improve guest experience and your tip, it’s important to flex to the needs of your guests. Don’t continue to push higher priced items if guests are starting to look uncomfortable.

They say the most successful salespeople believe in what they are selling — and the same goes for servers. Your servers should have tasted all of the higher priced menu options and be able to explain to guests why this upgrade brings their dining experience to the next level.

3. Start with the drinks

Alcohol sales are restaurants’ bread and butter. So when a table orders the first round, servers should make it count.

Scenario #1: A customer orders a simple spirit + mixer drink

If a guest asks for a vodka soda, this is an opportunity to turn a $10 drink to $15 or even $20 — which will add up after a few rounds.

Naturally, most servers would ask what vodka the guest prefers. Teach your servers to resist that urge! Instead, servers should offer them a selection of higher-shelf options. For example, a server could respond with, “Vodka soda? Sure, would you like that with Tito’s, Ketel One, Grey Goose…?” And keep listing options until one resonates with the guest. That gives the guest the impression that they have a seasoned, well-informed server, but this framing also leads the customer to choose from the higher-shelf suggestions, rather than just asking for the house vodka.

Scenario #2: Ordering a glass of wine

We’re not suggesting you hire a sommelier, but getting more familiar with common flavor profiles and notes in wine can be a game-changer for servers’ nightly tip income.

Customers often ask for something similar to pinot grigio, cabernet sauvignon, or a pinot noir, and if their server can give a detailed description that makes a wine sound irresistible, they’re probably going to splurge for the higher-end wine. Bonus points for servers who can successfully suggest splitting a bottle (because once they taste it, they’ll want more than one glass!).

Consider hosting a weekly wine training to help your servers get more familiar with what your bar has to offer. Another pro-tip: Teach your servers about beer and wine pairings! When servers let guests know which entrees pair well with the drink they’ve ordered, guests may opt for a higher-priced entree to match their favorite beverage.

Don’t skip over the apps

Not everyone is going to order an app — but there are a few small changes servers can make to their dialogue with customers to convince those who wouldn’t normally spring for a first course.

For one, servers shouldn’t just ask if they’d like anything to start. Instead, teach your servers to approach tables with a suggestion for a specific menu item. For example, they could say, “Would you like a charcuterie board to start? We just added a really delicious local cheddar to our rotation.”

Offering patrons a specific menu item and talking up the details makes it a lot easier to add that extra course to their meal — increasing their check size and making it more likely that they’ll order a second beverage.

Taking the order

When it’s time to take the entree order, this is your servers’ time to shine. Just like the previous courses, they should know how to create opportunities to upsell guests by making entree upgrades too enticing to pass up.

From fine dining to fast casual, many American restaurants offer a burger on their menu. Rather than simply asking, “Great, are fries ok with that?” task your servers with turning a simple cheeseburger into a deluxe meal with several upsells.

First, make sure your staff knows your menu options well, so they can pass along those options to customers. Here are a few common upgrades that servers should be asking guests if they would like:

Pretzel or gluten-free bun
Added cheese
Premium toppings, like bacon, egg, avocado, etc.
A premium patty, like bison or imitation beef

Rather than asking if fries are okay, instruct servers to say, “What side would you like? We have french fries, macaroni and cheese, caesar salad…” and continue with options until one piques the guest’s interest. If they succeed in getting at least one upgrade to a customer’s burger and a premium side, the check can increase by around $4 per person, depending on the pricing at your restaurant.

Higher-end restaurants should follow the same formula, subbing in an option for steak oscar rather than a bacon cheeseburger. The goal is for servers to provide options for guests who may not realize that their favorite accoutrement is on the menu — and will gladly pay for the upgrade.

The grand finale

“Did you save room for dessert?”

Servers often bring out this line while pre-bussing tables, usually expecting guests to say that they’re far too full to even think about dessert. If you want to convince more guests to stick around for a final course, ask your staff to remove that phrase from their vocabulary.

Dessert is a rich treat for the senses that most of us crave at the end of the night, so servers shouldn’t treat it like an afterthought in front of customers. As they’re clearing away dishes, servers can tap into their senses by talking about your pastry chef’s perfect chocolate cake with buttery layers of icing, or the warm peach cobbler served with house-made vanilla ice cream on the side.

Even if guests seem like they’re truly full, your team can still offer them a slice to-go, since they’ll surely be wishing for something sweet in about an hour anyway.

Reap the rewards

After putting on their best smiles, connecting with guests, and using these upselling tricks, your servers should ring in above-average size checks — and an above-average amount of tips.

Once your servers see their huge tip out for the night, they’ll want access to those funds ASAP. At Kickfin, we provide instant digital tip payouts, so managers don’t have to waste time counting cash and servers can clock out of their shifts sooner.

Check out a demo of Kickfin today.

Product and Company News

Kickfin Ranked Fastest Growing Restaurant Tech Company | 2024 Inc. 5000

Kickfin ranked in the top 3% of Inc.’s 5000 fastest-growing companies — and we’re leading the charge for tip management software.

Every year, Inc. identifies 5,000 U.S.-based companies that have seen the highest rate of growth over the past three years based on revenue — and this year, Kickfin was at the top of the top.

A few stats we’re pretty proud of:

🏆 Kickfin ranked 189th overall.
🏆 We’re the fastest-growing restaurant tech company on the list.
🏆 We’re in the 💥 top 3%💥 of all 5000 companies.
🏆 We ranked 24th in the Software category.

Since 2020 — in spite of a pandemic, supply chain disruptions, The Great Resignation, and record-setting inflation — we’ve grown by 2,066%.

Our Keys to Success

We’ll cut right to the chase: We owe our success to our customers. (It’s not cliche if it’s true, right?)

The bottom is that we know the way you pay your staff matters, a lot. Thousands of restaurants are trusting us to handle that for them, and we don’t take that trust lightly.

And of course, we might be biased, but we think we’ve got the best team and partners in the biz. Thanks to everyone who has helped build, support and evangelize Kickfin. This has been a big year for our small but mighty company — and there’s a whole lot more to come.

This kind of growth doesn’t happen overnight. We’ve been putting in the work to make Kickfin even better for the thousands of restaurants we serve. Here are just a few ways we’ve expanded to better serve Kickfin customers.

Integrations

We’re making it easier to access and use Kickfin by integrating with dozens of leading POS systems, including Toast and SkyTab. Using our integration, managers can pull tip data directly from their POS and Kickfin will handle even the most complex tip calculations in a matter of minutes.

Thanks to our POS partnerships, we’re able to bring a further simplified version of Kickfin to new and existing customers so they can kick cash to the curb. As an early adopter of our Toast integration, Bar Louie has already saved around 15,000 hours in labor annually by cutting their tip calculation time from hours to minutes.

>> See more customer success stories

Find out if your POS integrates with Kickin, and reach out to our support team to learn how you can activate the integration.

New Features

Kickfin is no longer just an alternative to cash tip-outs — we’re a holistic solution to your entire tip management system.

In case you missed it, 2024 has been a big year for our product. In addition to our new integrations, we’ve rolled out some exciting new tip management features, including:

Splitting large party tips
Increased security
Reallocating manager tips
Preventing labor cost mistakes

>> Learn more about Kickfin’s newest features

Each of these new updates is inspired by requests from operators, managers and restaurant employees who use our product daily — and that’s something that will never change. As we continue to innovate our best-in-class tip management solution, we’ll always be listening to and learning from our customers so we can ensure every need is met and every expectation is exceeded.

What’s next for Kickfin?

We’re not stopping anytime soon. Expect to see more POS integrations, more user-friendly features, and more guidance from our amazing customer support team.

Not a Kickfin user yet? Now’s the time to rise with us! Get a demo of our restaurant-revolutionizing product today.

We’ll see you next year on the Inc. 5000!