Restaurant Profit Margin Calculator
Easily calculate your restaurant’s profits and make better decisions to grow your business.
Restaurant Profit Margin Calculator
Calculate your restaurant’s net profit and profit margin percentage with precision
A restaurant’s profit margin shows what portion of your total earnings remains after paying all operating costs. It reflects how much actual profit you make from each dollar in revenue.
For example, if your restaurant earns $10,000 in sales and you keep $1,000 after costs, your profit margin is 10%.
Understanding your profit margin helps you:
- Make better financial decisions
- Know if your pricing is right
- See if costs are too high
Gross Profit Margin
Gross profit margin shows the amount of revenue remaining after deducting the cost of ingredients, packaging, and other direct food-related expenses (COGS).
It answers the question: “How much am I making from the food itself?”
Formula:
Gross Profit Margin (%) =
(Revenue − COGS) ÷ Revenue × 100
| Metric | Value ($) |
|---|---|
| Revenue | 10,000 |
| COGS | 4,000 |
| Gross Profit | 6,000 |
| Gross Margin | 60% |
A 60% gross margin means you keep $0.60 for every $1 in sales before paying other costs.
Net Profit Margin
Net profit margin shows how much you keep after all expenses, including food, labor, rent, utilities, marketing, and more.
It provides a clear overview of how financially strong your restaurant is.
Formula:
Net Profit Margin (%) =
(Revenue − Total Expenses) ÷ Revenue × 100
Where total expenses = COGS + Labor + Overhead.
How Much Profit Do Restaurants Typically Make?
A restaurant’s profit margin depends on its service style and where it’s located. Here are some general benchmarks:
| Type of Restaurant | Avg. Net Margin |
|---|---|
| Quick Service (Fast Food) | 6% – 9% |
| Full-Service/Casual Dining | 3% – 5% |
| Coffee Shops / Bakeries | 5% – 10% |
| Bars / Alcohol-Focused | 10% – 15% |
Fast-casual or limited-menu places often see higher profits due to low overhead and simplified operations.
How to Calculate Profit Margin
To calculate your restaurant’s profit margin:
- List total revenue – all income from food, drinks, delivery, etc.
- Add up costs – COGS, labor, rent, utilities, etc.
- Subtract costs from revenue – this gives you net profit.
- Calculate the percentage by dividing your net income by total revenue, then multiplying the result by 100.
Profit Margin Formula
Net Profit Margin (%) =
(Revenue − [COGS + Labor + Overhead]) ÷ Revenue × 100
Or in numbers:
If Revenue = $12,000
COGS = $4,800
Labor = $3,200
Overhead = $1,500
Net Profit = 12,000 − (4,800 + 3,200 + 1,500) = $2,500
Profit Margin = (2,500 ÷ 12,000) × 100 = 20.83%
Example
Let’s say your monthly numbers are:
- Revenue: $15,000
- COGS: $5,000
- Labor: $4,000
- Overhead: $2,500
Step 1: Total expenses = $5,000 + $4,000 + $2,500 = $11,500
Step 2: Net profit = $15,000 − $11,500 = $3,500
Step 3: Margin = ($3,500 ÷ $15,000) × 100 = 23.33%
That’s a strong profit margin. A typical target for restaurant profit margins is between 10% and 20%.
Tips to Increase Profitability in Your Restaurant
If your margin is low, don’t panic. Many restaurants struggle in the beginning. Here are a few ways to improve:
- Negotiate food costs: Get better deals from suppliers.
- Update pricing: Adjust menu prices to reflect real costs.
- Optimize labor: Schedule smartly to avoid overstaffing during slow times.
- Reduce waste: Use inventory tools to track ingredients.
- Promote high-margin items: Highlight items with low cost and high value.
Minor adjustments in your operations can lead to noticeable profit gains.
Common Profit Margin Pitfalls to Avoid
Running a restaurant is tough. These are common mistakes that hurt profits:
- Not tracking costs: Without proper tracking, your profit disappears silently.
- Underpricing menu items: Know your cost per dish, including sauces and packaging.
- Too many staff during slow hours: Labor adds up quickly.
- Ignoring overhead: Rent, utilities, repairs — all eat into your margin.
Review these cost factors regularly to prevent unexpected losses.