Your restaurant is generating revenue, but is it profitable?
7 numbers you should track every month
A busy restaurant isn't necessarily a profitable restaurant.
You can have customers, a busy team and thousands of euros coming in every month and still reach the end of the month without knowing exactly how much money the business actually generated.
The problem is that revenue, on its own, tells you very little about the health of a restaurant.
To understand whether the business is really performing, you need to track a few key numbers that show where you're making money, where you're losing it and where you need to take action.
In this article, we've brought together 7 key metrics that every restaurant owner or manager should understand and monitor regularly.
1. Revenue: how much is your restaurant actually selling?
Revenue is probably the number every restaurant owner knows best. It shows how much the business sold over a given period, but it doesn't show how much it actually earned.
A restaurant can generate €50,000, €100,000 or €200,000 in monthly revenue and still have very low profitability. It all depends on the costs required to generate those sales.
That's why looking only at revenue growth can create a false sense of progress.
Imagine your restaurant's monthly revenue increased from €70,000 to €80,000. At first glance, that's growth of around 14%. That's good news.
But what if, during the same period, ingredient costs increased, you needed more staff hours and the remaining operating costs also went up? You may be selling more and, in the end, earning exactly the same or even less.
So, why should you track revenue?
Revenue is still a fundamental metric. The important thing is to analyse it in context.
Compare monthly and annual performance, identify periods of higher and lower demand, and relate sales to other business metrics. When revenue increases, it's important to understand what drove that growth and whether it translated into higher margins and more profit.
The key idea: Generating more revenue doesn't necessarily mean earning more. Revenue shows how much you've sold. The next metrics help you understand how much of those sales you're actually turning into profit.
2. Food Cost: how much does what you sell actually cost you?
Food Cost shows what percentage of food and beverage sales is consumed by the cost of the ingredients used to generate those sales.
It's one of the most important metrics in the restaurant industry because small variations can represent thousands of euros by the end of the month.
In simplified terms, you can calculate it like this:
| Food Cost (%) = Cost of ingredients ÷ Sales × 100
For example, if over a given period the restaurant recorded €20,000 in ingredient costs and €70,000 in sales, Food Cost would be approximately:
€20,000 ÷ €70,000 × 100 = 28.6%
This means that for every €100 in sales, around €28.60 was consumed by ingredient costs.
Does a higher Food Cost always mean you're paying more for ingredients?
Not necessarily.
Supplier prices are only one of the variables. An increase in Food Cost may also be related to waste, inconsistent portions, outdated recipe costing, inventory errors, changes in the sales mix or selling prices that no longer reflect current costs.
That's why it's not enough to know that Food Cost has increased. What matters most is understanding why it increased and where you need to take action.
There is also no universal percentage that determines whether Food Cost is “good” or “bad” for every restaurant. The concept, menu, pricing, type of product and the operation itself all influence what is sustainable for each business.
The most useful approach is to track how the metric evolves, compare it with the targets set for the restaurant and investigate significant deviations.
The key idea: Controlling Food Cost doesn't simply mean buying cheaper. It means understanding how much of your sales is being consumed by ingredient costs and identifying the causes when that figure deviates from what you expected.
3. Labour cost: how much of your revenue is consumed by your team?
Your team is one of the biggest costs in a restaurant and, at the same time, one of the resources that most influences service quality and the ability to generate sales.
That's why reducing labour cost shouldn't be a goal in itself. What matters is understanding whether that cost is appropriate for the restaurant's sales volume and operational productivity.
| Labour cost (%) = Labour costs ÷ Sales × 100
In a restaurant generating €80,000 in revenue with €24,000 in labour costs, this metric represents 30% of sales.
But a lower figure doesn't automatically mean a better operation. Cutting staff hours may reduce costs, but it can also lead to slower service, an overloaded team or lost sales.
This metric should therefore be analysed alongside revenue, hours worked, productivity and the real needs of the operation.
The key idea: The goal isn't to have the cheapest team possible, but a properly staffed and productive team whose cost is sustainable for the business.
4. Prime Cost: how much of your sales is already committed?
Once you understand Food Cost and labour cost, it makes sense to look at them together.
Prime Cost combines ingredient costs and labour costs. It shows how much of your sales is being absorbed by two of the largest cost areas in a restaurant.
| Prime Cost (%) = (Cost of ingredients + Labour costs) ÷ Sales × 100
Using the previous examples, if the restaurant has €20,000 in ingredient costs, €24,000 in labour costs and €80,000 in sales, Prime Cost will be 55%.
This means that for every €100 in sales, €55 has already been consumed by these two areas, before taking into account other business costs such as rent, energy, insurance, maintenance or external services.
That's why tracking only Food Cost or only labour cost can hide part of the problem. An improvement in one area can be cancelled out by an increase in the other.
The key idea: Prime Cost helps you quickly understand how much of your revenue is being absorbed by the two main operational cost areas and whether their evolution is leaving enough room to cover the remaining costs and generate profit.
5. Average spend: how much does each customer spend on average?
Average spend shows how much each customer spends, on average, in your restaurant and helps you better understand what is driving changes in revenue.
A restaurant can increase sales because it served more customers, because each customer spent more, or through a combination of both. Average spend helps you distinguish between these situations.
| Average spend = Sales ÷ Number of customers
If, over a given period, the restaurant generated €80,000 in revenue and served 4,000 customers, the average spend was €20 per customer.
Tracking how it evolves can help you understand the impact of changes to the menu, pricing, team recommendations, and sales of drinks, starters, desserts or other additional items.
But, as with the other metrics, a higher average spend shouldn't be analysed in isolation. If it increases simply because you've raised prices, for example, you also need to understand what happened to customer numbers, sales and margins.
The key idea: Average spend helps you understand how much each customer contributes, on average, to sales and whether you're managing to increase the value generated by each visit.
6. Break-even point: how much do you need to sell before you start making money?
Break-even point: how much do you need to sell before you start making money?
Knowing this figure helps turn a vague question like “are we selling enough?” into a concrete benchmark for tracking the business's performance.
To calculate it, you need to distinguish between fixed costs, which remain even when sales are lower, and variable costs, which tend to change with sales volume.
In simplified terms:
| Break-even point = Fixed costs ÷ Contribution margin (%)
If a restaurant has €20,000 in monthly fixed costs and a 40% contribution margin, it needs to generate approximately €50,000 in sales to reach the break-even point.
Below that figure, the operation isn't generating enough margin to cover all its costs. Above it, there begins to be room to generate profit.
The key idea: Knowing the break-even point allows you to understand the minimum level of sales required to support the restaurant's cost structure and the point at which the business starts generating profit.
7. Profit margin: how much actually stays in the business?
After revenue, ingredients, labour and all the remaining costs, there is one essential question: how much of your sales actually remains?
Profit margin shows what percentage of revenue is actually converted into profit after taking the business's costs into account.
| Profit margin (%) = Profit ÷ Sales × 100
If a restaurant generates €80,000 in revenue over a given period and, after accounting for costs, produces €8,000 in profit, it has a profit margin of 10%.
This means that for every €100 in sales, €10 was converted into profit.
That's exactly why two restaurants with the same revenue can have completely different financial realities. One may turn a healthy share of its sales into profit, while another may operate on margins so thin that any increase in costs or drop in sales puts the business under pressure.
Rather than simply tracking how much you sell, what matters is understanding how much you retain after covering the costs required to generate those sales.
The key idea: Revenue shows the size of your sales. Profit margin helps you understand the economic quality of those sales and how much of the money coming in is actually turned into profit.
Don't analyse these numbers in isolation
None of these metrics tells the full story on its own.
Imagine two restaurants generating €80,000 per month. At first glance, they may look like similar businesses. But one may have a Food Cost of 27% and the other 36%. One may have a team that is properly matched to its sales volume, while the other may have an excessively heavy cost structure.
The same revenue can hide completely different businesses.
It's when you combine these metrics and track how they evolve that you begin to understand where you're making money, where you're losing it and where you need to take action.
Knowing the numbers is only the first step
Simply having access to these metrics does not automatically mean you know what to do with them.
You need to understand the deviations, identify priorities and turn that information into concrete decisions and actions.
At Resprofits, this is exactly the process we work on with restaurant owners and managers: creating greater control over the numbers, processes and decisions that determine the profitability of the business.
If your restaurant is generating revenue but you still don't have the clarity and control you'd like over your results, discover 90 Days to Profit and see how the programme works.