Navigating the UK’s restaurant scene requires a keen understanding of your finances, especially in a post-Brexit and post-pandemic landscape. A well-crafted profit and loss (P&L) statement is crucial, serving as a snapshot of your business’s financial health. It breaks down revenue and expenses, ultimately revealing your net profit or loss. 

The UK restaurant market, valued at £18.7 billion in 2023, is rebounding, albeit still 2.6% shy of its pre-pandemic value. Despite the challenges, including a 64% jump in restaurant insolvencies in 2022, a P&L statement remains a vital tool for restaurateurs to steer through economic uncertainties and capitalise on growth opportunities.

By mastering your P&L, you can harness resilience, spot financial trends, and make strategic decisions to enhance profitability. Read on and let this article guide you through creating and interpreting a P&L statement aligning with the UK’s unique market conditions. 

What should a restaurant profit and loss statement include?

A restaurant’s P&L statement is a financial compass, guiding owners through the complexities of the UK’s culinary landscape. It’s divided into four critical sections, each offering insights into the establishment’s financial flow. 

Revenue

Revenue is the lifeblood of your restaurant, representing the total earnings from food, drinks, and services provided. It’s calculated by tallying up sales or multiplying the number of items sold by their average price. For a granular view, segment revenue by service types—dine-in, takeaway, delivery, and catering—to pinpoint profit sources. 

Cost of goods sold (COGS)

COGS reflects the expenditure on ingredients and beverages served, which is essential for menu pricing strategies. To compute COGS, start with your initial stock value, add purchases made within the period, and subtract the closing stock value. Break down COGS further into food and beverage categories, assessing their revenue percentage to manage cost-effectiveness.

Labour costs

Labour costs encompass the total spend on your workforce, from salaries and wages to bonuses and benefits. Sum up your payroll data to capture this figure. Dissect these costs between front-of-house and kitchen staff, evaluating their revenue percentages to ensure a balanced investment in your team. 

Operating expenses

Operating expenses cover the gamut of costs incurred to keep the restaurant running smoothly, excluding COGS and labour. This includes rent, utilities, marketing efforts, and more. Compile all related bills and receipts to calculate this total. Distinguish between fixed and variable expenses, understanding their impact on revenue to fine-tune budgeting. 

How do you create a restaurant profit and loss statement?

Creating a P&L statement is crucial to assess financial performance, as it provides transparency and insight into business viability. Here’s how to craft one to suit your operational needs.

Templates

Templates are a straightforward solution for assembling a P&L statement. Opt for a spreadsheet or document template online to systematically input your financial data. While these offer a time-saving advantage, ensure they’re tailored to reflect the unique aspects of your UK establishment for precision.

Software

Leverage technology with accounting or restaurant management software to automate your P&L creation. These tools not only expedite the process but also unveil deeper financial insights. It’s crucial to select software that integrates seamlessly with your existing systems and upholds stringent security standards.

Accountants

For those seeking expertise, enlisting a professional accountant, whether in-house or outsourced, can be invaluable. They bring a wealth of knowledge and can navigate the intricacies of UK tax laws and financial regulations, ensuring your P&L is both compliant and optimised. 

Best practices for P&L precision

Regardless of the method chosen, adhere to these best practices to ensure your P&L’s accuracy and relevance: 

Data collection

Gather all pertinent financial records—sales, inventory, payroll, and expenses. Organise this data meticulously, maintaining consistency in categorisation and terminology. 

Periodicity

Establish a regular interval for your P&L statements, be it monthly, quarterly, or annually. Adherence to a consistent timeframe is essential for meaningful financial analysis.

Analysis

Regularly compare your current P&L with past statements, budgets, and industry standards. Review the factors influencing your profit margins to identify areas ripe for enhancement.

How do you read and analyse a restaurant’s profit and loss statement?

Reading and analysing your P&L statement helps you understand your financial status and make informed decisions to enhance overall performance. Key numbers and ratios to focus on include:

Net profit or loss

Your P&L’s bottom line is the ultimate indicator of financial health. It’s straightforward: a positive figure signals profitability, while a negative one flags potential issues. To get a sense of scale, calculate your net profit margin by dividing net profit by total revenue, giving you a percentage of revenue that’s pure profit.

Profit margin

Profit margin is a telling sign of how well you’re pricing your dishes versus the costs of production. It’s the revenue left after COGS are subtracted, expressed as a percentage of total revenue. A robust profit margin suggests your markup is on point, whereas a slim margin could indicate it’s time to reassess your pricing strategy.

Prime cost

Prime cost combines your COGS and labour expenses, offering insight into your major outlays. Keeping this figure in check is essential. A lower prime cost percentage of revenue means you’re managing these costs effectively, enhancing your potential for profit.

Breakeven point

The breakeven point is where your sales exactly cover your costs—no profit, no loss. It’s a critical threshold, especially in the UK’s competitive market. Calculate it by dividing fixed costs by your contribution margin (revenue – variable costs). A lower breakeven point equates to less risk, providing a buffer in volatile times.

How do you improve your restaurant’s profit and loss statement?

A thorough analysis of your P&L statement can illuminate paths to bolster your restaurant’s financial success. Below are tips on how you can refine your approach to enhance both profitability and operational efficiency.

Reduce costs

Reduce expenses by negotiating with suppliers, buying in bulk, and improving inventory management. Embrace energy-saving appliances and outsource non-essential tasks. 

Increase sales

Enhance revenue by adjusting prices, offering promotions, and expanding your menu. Improve customer service and strengthen your online presence to attract more patrons.

Optimise menu

Analyse your menu’s performance. Focus on high-margin items, adjust portions and prices, and promote popular dishes to maximise profits. 

Elevate your restaurant’s P&L

For UK restaurateurs, a comprehensive P&L statement is indispensable for financial clarity and strategic growth. It’s a tool that goes beyond mere accounting, providing insights that can transform your business operations.

Embracing Foodstars’ dark kitchen model can significantly reduce operational concerns. With facilities designed for efficiency, Foodstars offers a low-risk, high-reward environment that allows you to focus on what you do best—cooking great food. By licensing a Foodstars kitchen, you can bypass the hefty overheads of traditional restaurant spaces and enjoy the flexibility to scale swiftly in response to market demands.

Interested in how Foodstars can streamline your operations and complement your P&L strategy? Reach out to us and explore our smart kitchen solutions that cater specifically to the delivery market, positioning your restaurant for success in the bustling UK food scene.