How to calculate your restaurant's profit margin: food, labour and rent in numbers
Many restaurants sell well and still do not profit, because nobody calculated the three numbers: food, labour and rent. This guide gives you the simple formulas and shows where profit leaks.
The four formulas
Each figure is calculated over a specific period (a week or a month):
- Food-cost % = (opening stock + purchases − closing stock) ÷ sales.
- Labour % = wages, salaries and insurance ÷ sales.
- Prime cost = food + labour; it is commonly kept under roughly 60–65% of sales as a rule of thumb, not a law.
- Net profit = sales − food − labour − rent − other expenses (electricity, marketing, maintenance, delivery commissions).
Where profit leaks
Unrecorded waste, recipes without weights so consumption exceeds plan, delivery-app commissions not included in item pricing, and staff discounts and voids without oversight. That is why manual Excel calculation is slow and a month late.
How a restaurant system shows it
In RAWA every sale deducts the recipe's ingredients and posts to accounting automatically, so you get actual food cost, profit and loss, and a trial balance instead of waiting for month-end. Purchases and expenses live in the same system.
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Start a free 7-day trial — no cardCommon questions
What is a good food-cost percentage?
It varies by restaurant type, but many restaurants aim near thirty percent; what matters is measuring it regularly and knowing why it rises.
How do I know the cost of one dish?
From the recipe: each ingredient's weight × its purchase price. In RAWA recipes deduct stock and give the cost automatically.
Is accounting built in?
Yes, every sale posts to the books automatically along with purchases and expenses.
Which number should I watch daily?
Sales, cash variance and waste; weekly, food cost.