Today, I want to teach you how to read a restaurant P&L.
Hey, everybody. My name is Ryan Gromfin. I am an author, speaker, chef, restaurateur,
and the founder of the Restaurantboss.com,
as well as clickBACON.com.
And like I said, today, I want to teach you all about restaurant P&Ls,
but here's the thing about a P&L or profit and loss statement.
It's like a history book,
it's all the things that happen in the past.
Now the past can sometimes be a great predictor of the future,
but it's very hard to take action and it's nearly impossible
to change the past.
Operating a business on a P&L
is like driving a car looking through a rear-view mirror.
So, if the P&L
is a tool that we use to tell us what happened in the past,
what do we do to tell us what's happening right now?
How we can make changes right now
to influence our targets?
You may have a target cost of goods sold, but if you wait for your P&L,
then to find out that you missed it,
there's really nothing you can do about it.
Now, you can make some changes for next month or the month after the month after,
but there's not much you can do about it.
So one, first thing most important about a P&L -
whether you're creating it yourself or having a bookkeeper do it,
make sure you get a P&L by the 5th of the month.
If you're waiting until the 10th or the 15th or the 20th or the next month
to get the previous month's P&L,
not only is that information old,
it's really old. So one,
if you're going to use a P&L and only a P&L to run your business,
make sure your P&L is as close to current as possible.
2) Don't use a P&L to run your business,
it's a history book. Use a budget.
Set up a budget. How much do you think you're going to do in sales?
What percentage of your sales are food, beverage, etc.?
What's your target food cost?
Then, you can figure out how much you can purchase
based on that target food cost,
and then you can track it on a daily basis and know where you're going.
Now that sounds a little complicated and it
could be a little complicated if you try to do it yourself,
but there are some tools out there that can help you.
I've actually developed a software or a software tool called Bacon.
You can click on the link below this video to take a look at it.
It's called clickBacon, the website is clickBacon.com
There's a link below the video where you can take a look at that,
but I promise to show you all about a P&L today,
so let's go inside my computer and let me show you
how to read a P&L and what a P&L
can tell you and what actions you can take
based on what you learned on that P&L.
See you inside my computer.
Okay, so here we are just looking at a sample P&L.
I know this is a sample P&L because it says sample P&L,
but all kidding aside, this is something that I use to help
new clients that are opening up a restaurant do some predictions,
some sales forecasting,
but basically, a restaurant P&L and most P&L are going to be divided into
four major categories, then the subcategories could be endless,
but really the four major categories are going to be sales or income.
In the restaurant business, we usually call it sales.
This is going to come at the top
and this is always going to be a percentage of a hundred.
So, this is where you're going to break down your sales by different categories.
A lot of times people get confused and they'll put things like
department sales on here, like catering or something like that.
The reality is that's a department,
that has nothing to do with sales because catering in of itself.
Well, catering is made up of food, beverage, beer,
wine, liquor, right?
And so you're never going to get an accurate cost of goods sold
if your sales or income categories
don't match your cost of goods sold categories, but I digress.
The first category is basically going to be your income or your sales.
The second major category
are going to be your controllable expenses.
Now in the restaurant, those controllable expenses are going to look like
your costs of goods sold, which is basically the cost
of something that you sell, right? So you, in this case,
you sold $61,000 of food,
it costs you $20,000 to sell that food.
You had to buy $20,000 of food to sell that food.
Same thing for beverage.
Now, this is not broken down into 100%,
the rest of the numbers are going to be broken down
to close to 100%, this is broken down
by the actual percentage of this.
So, right, 33% means that it's a 33% food
cost or basically the 20,000 divided by the 61,000.
So that's going to be the second part.
Oh, labor, then if you' ll notice, we break down labor
by the actual straight labor cost, taxes,
benefits, and insurance, which give us a total payroll cost.
So these are your controllable expenses, fully controllable expenses.
Now some places might…
different businesses will say like controllable expenses.
In the restaurant, we call them prime cost,
so that's going to be total cost of goods sold
plus total labor is going to give you prime cost.
Then, we move into the other two categories which are both
your fixed expenses.
One of them is a truly fixed expense,
one of them is a semi-fixed expense.
So, I call operating expenses, those are my semi-fixed expenses.
And what I mean by that is that they're influenced by sales,
but not directly, it's not a cost of goods sold,
it's not something we sell. You don't sell janitorial supplies,
but the busier you are, the more you're going to use.
You don't sell to-go containers, but the busier you are,
the more you're going to use. You don't sell a credit card fee,
but the busier you are, the more you're going to incur.
So these are the direct operating expenses,
and then I have fixed operating expenses,
where these are going to be expenses that have nothing
to do with how busy you are,
but it is related to operating but these are now falling under our
fixed expense category, that fourth category,
then we have fixed expenses, occupancy expenses,
and then… I'm sorry, fixed operating expenses, occupancy expenses,
and then truly fixed expenses.
These are the expenses that literally do not change
based on anything, right? Your rent
does not change based on how busy you are.
Your cable, your POS fees, your alarm fee,
for your Pest Control's - those don't change based on how busy you are.
Now they might slightly, but really they don't.
So, that's basically it, then what we're going to end up
with is going to be our totals for each category.
Our total expenses,
our total sales, and then our profit or loss.
Now in this case at the end of the year,
this restaurant had a $46,000 profit,
which is about a 3.9% profit.
And that is how you read a restaurant P&L or profit
and loss statement.
I hope that you enjoyed today's video
and I look forward to bringing you another one next week.
Have a wonderful day.
[Music]
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I use this planner every day in my business and actually,
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See every year when I sit down to plan out my year,
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And I'd like for you to have it for free.
All you have to do is head over to
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Again, that's TheRestaurantBoss.com/Goal
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Until the next time I see you, go out every day
and improve the lives of your customers,
your employees, your vendors, and of course, your family.