Your accountant sends you a P&L every month. Most independent operators glance at the bottom line and file it. Here's what you're actually supposed to look at.
A profit & loss statement is not a report card. It's a map. The problem is nobody teaches restaurant owners how to read it, so most of them look at the net income line, see a positive number, and move on. That single habit has closed a lot of restaurants that were technically "profitable" right up until they weren't.
Every P&L follows the same skeleton:
Prime cost is COGS plus total labor cost. It's the most important single metric on your P&L. Industry target: 55–65% of revenue. If your prime cost is above 65%, you have a structural problem - either food cost, labor, or both are out of control and no amount of revenue growth will fix it.
If you're doing $80,000/month in revenue and your prime cost is 70%, you're spending $56,000 on just food and labor. That leaves only $24,000 to cover rent, utilities, supplies, marketing, loan payments, and your own salary. In most markets, that math doesn't work.
Your rent line should be 6–10% of revenue for a healthy operation. If it's 15%, you're working for your landlord. This is why location decisions are irreversible - you can fix labor, you can fix food cost, but a bad lease follows you every month for the next 5–10 years.
Occupancy cost includes base rent, CAM charges (common area maintenance), property taxes passed through to you, and your pro-rata insurance. Always check what your lease defines as occupancy - some landlords get creative.
The dollar figures on a P&L are almost meaningless without context. A $12,000 labor cost sounds fine if you're doing $50,000 a month and terrible if you're doing $30,000. Express everything as a percentage of revenue:
When a line moves outside its normal range, that's your signal to investigate. The P&L won't tell you why food cost spiked from 30% to 36% - that's your job to figure out - but it will tell you that something happened.
Always compare to the same month last year, not just the prior month. December and January are not useful comparisons for most restaurants. December is often your best month. January is often brutal. If you compare January's P&L to December's, you'll panic every year for no good reason. Compare January to last January and you'll actually know if you're growing.
Your accountant gets you accurate numbers. What you do with those numbers is entirely on you. Review your P&L on the 5th–10th of every month when the prior month closes. Know your prime cost. Know your occupancy percentage. If a line item is out of range, have an explanation. If you don't have an explanation, find one before the next month closes with the same problem.
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