Restaurant profitability: how to calculate and improve it
You have guests and sales, but too little money left over? See a simple profitability calculation and where to start improving your restaurant’s performance.
Is your restaurant actually making money?
A full dining room and high turnover do not guarantee profit. What matters is how much remains after all costs. Profit margin shows how much profit you earn for every PLN 100 of sales.
Start with sales excluding VAT and net profit after all costs and income tax for one complete month. Ask your accountant for a report for your venue. This is a starting point: also check stock and that costs are allocated to the same period. Purchases are not the same as product consumption, and your bank balance does not show your profit.
How do you calculate profitability? A simple example
Suppose a restaurant has monthly sales of PLN 100,000 excluding VAT. After accounting for products, labour, rent, utilities, all other costs and income tax, PLN 8,000 of net profit remains.
The net profit margin is 8%. In other words, every PLN 100 of sales leaves PLN 8 of profit. This is a fictional example, not a recommended target for every restaurant.
Net profit margin = net profit ÷ sales excluding VAT × 100%
PLN 8,000 ÷ PLN 100,000 × 100% = 8%
Where should you first look for the cause of poor results?
Do not start by lowering quality or cutting the team. First establish where money is being lost and why.
- Products: do recipes and portions match reality? How much do you discard, and what does the stocktake show?
- Sales: what remains after ingredients, discounts, packaging and commissions? A popular dish does not always deliver the best result.
- The team’s work: does the rota reflect demand and tasks before and after service?
- Other costs: do rent, utilities, subscriptions and maintenance consume what remains after products and labour?
Read: your restaurant has sales but no profit. What should you check?
Where should you start at your venue?
Choose your five best-selling dishes. Compare current ingredient purchase prices, recipe quantities and portions actually served. Include preparation waste. Start with the largest confirmed discrepancy and agree on an action and the person responsible.
After the change, review portion cost, sales and quality. When assessing the whole venue, compare similar months and consider the team’s workload. If you regularly replace employees without taking pay, also assess the value of your own work.
Not sure where to start?
You do not have to find the cause on your own. At Hospitality Pro, I review the figures and daily restaurant operations to identify losses and practical actions.
During a free introductory call, tell me what concerns you. We will discuss which information to prepare and whether an audit would help in your situation.