How to Read a Restaurant P&L Statement
Your P&L is the scoreboard for your restaurant. Here's how to read every line — sales, COGS, labor, prime cost, and profit — and what each number should be.
A restaurant profit and loss statement (P&L) is a one-page summary of what you sold, what it cost you, and what was left over as profit for a given period. Read from top to bottom, it walks from total sales down through your costs to the bottom line. If you learn to read only one financial document, make it this one — it tells you in five minutes whether last month made money and, more importantly, where the money went.
The structure, top to bottom
Every restaurant P&L follows the same skeleton. Here's a simplified month for a restaurant doing $100,000 in sales:
| Line | Amount | % of sales |
|---|---|---|
| Total sales | $100,000 | 100% |
| Cost of goods sold (COGS) | $31,000 | 31% |
| Gross profit | $69,000 | 69% |
| Labor (wages + taxes + benefits) | $30,000 | 30% |
| Prime cost (COGS + labor) | $61,000 | 61% |
| Occupancy (rent, utilities) | $8,000 | 8% |
| Other operating expenses | $18,000 | 18% |
| Net profit | $12,000 | 12% |
Read every line as a percentage of sales, not just a dollar figure. Percentages let you compare a slow month to a busy one and spot a problem that raw dollars hide.
Sales: the top line
Sales sit at the top because everything below is measured against them. Break sales out by category — food, beverage, retail — because each carries a different cost. A month where sales rose but profit fell usually means your sales mix shifted toward lower-margin items, and only a categorized top line reveals it.
COGS and gross profit
Cost of goods sold is what the food and drink you sold actually cost you. Subtract it from sales and you get gross profit — the money available to cover everything else. Most full-service restaurants run COGS between 28% and 35%. If yours is climbing, our guide on calculating food cost percentage shows how to bring it down.
Labor and prime cost
Labor is your other big controllable cost. Add COGS and labor together and you get prime cost — the single most-watched number in restaurant finance.
Keep prime cost at or below 60–65% of sales. Above that, it's very hard to be profitable no matter how busy you are.
Prime cost matters because these are the two costs you can actually change week to week. Rent is fixed; portioning and scheduling are not. See understanding prime cost and why it matters for a deeper look.
Fixed costs and the bottom line
Below prime cost come the costs that don't move much with sales: rent, insurance, and other operating expenses like marketing, repairs, and — worth naming here — your POS and technology stack. This is one line many owners overpay on. Legacy systems that charge $470+ a month for POS plus add-ons for online ordering, loyalty, and reporting quietly inflate this section. An all-in-one platform like Cobblestone POS folds all of that into one free tool, so the line item shrinks and drops straight to net profit. What's left after every cost is your net profit — the number that actually pays you.
Use it, don't file it
A P&L only helps if you read it monthly and act on it. Compare each line's percentage to last month and to your target. When a number drifts, trace it: a jump in COGS points to waste, pricing, or vendor creep; a jump in labor points to scheduling or overtime. Pair your P&L with a break-even analysis and you'll know not just what happened, but how much you needed to sell to cover it. The owners who read their P&L every month are the ones who catch small leaks before they sink the boat.
Build your own statement with the free Restaurant P&L Template (Excel).
