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Guide summary
- The six key ratios to monitor are: average ticket, gross margin, food cost, staff cost ratio, operating expenses and prime cost. If you don't measure them, you can't improve them.
- Your prime cost (food cost + staff ratio) should never exceed 60% of your revenue. Above that threshold, your restaurant's profitability is at risk.
- A healthy gross margin sits between 65% and 72% for traditional restaurants. Below 65%, you need to review prices, portions or suppliers.
Table of contents
Managing a restaurant's finances is not just about keeping the books up to date. It means knowing exactly how much each dish costs you, what margin each service generates and whether your business can withstand the slow months of January. In a sector as competitive as hospitality, financial management makes the difference between growing and closing. Discover the financial ratios you need to monitor, how to reduce costs without sacrificing quality and which tools to use.
Key figures
- €116.193 billion in restaurant revenue in 2024, 4.7% of national GDP
- +3,768 net businesses in 2023: 38,015 openings versus 34,247 closures. The sector is growing, but so is competition
- Only 38.5% of businesses survive five years after their creation
What indicators should you monitor in your restaurant's financial management?
To manage your finances well, you need to handle a set of ratios that give you a clear and objective picture of your restaurant's health.
| Financial indicator | Indicative benchmark | Formula | Monitoring frequency |
|---|---|---|---|
| Average ticket | Varies by establishment type | Total revenue / Number of covers | Per service or daily |
| Gross margin | 65–72% | (Revenue – Cost of goods) / Revenue × 100 | Weekly or monthly |
| Food cost (cost of goods) | 25–35% | Cost of goods / Revenue × 100 | Weekly |
| Staff costs | 30–35% | (Salaries + Social security) / Net revenue × 100 | Monthly |
| Operating expenses | 20–25% | Operating expenses / Revenue × 100 | Monthly |
| Prime cost | < 60% | Food cost + Staff ratio | Monthly |
The average ticket
The average ticket is the starting point of any financial analysis in a restaurant. It measures how much each customer spends on average per visit, and allows you to compare your performance from one month to the next, from one service to another.
Average ticket = Total revenue / Number of covers
It is advisable to calculate it by service (lunch and dinner) to detect differences in customer behaviour between the two shifts.
Your restaurant's gross margin
The gross margin measures how much of each euro in revenue remains after deducting the cost of raw materials. It is the first profitability indicator and the one that best reflects whether your menu is well thought out.
Gross margin = (Revenue – Cost of raw materials) / Revenue × 100
For a restaurant to be profitable, it is recommended to maintain a gross margin of between 65% and 72%. That said, margins vary depending on the type of product. For wines and spirits, the gross margin usually sits between 70% and 85%, while for food, a healthy benchmark ranges between 60% and 75%.
If your gross margin falls steadily, it is a sign that your prices are too low, your portions too generous or your suppliers too expensive.
The raw material cost ratio (food cost)
The food cost expresses what percentage of your revenue goes towards buying the ingredients you use to cook.
Food cost = (Cost of raw materials / Revenue) × 100
This ratio is recommended to sit between 25% and 35% of revenue. If you regularly exceed that threshold, it is worth reviewing your dish technical sheets, renegotiating with suppliers or adjusting portions.
The staff cost ratio
Staff are, along with raw materials, the biggest expense for any restaurant. This ratio measures the weight of your payroll on revenue, including gross salaries and social security contributions.
Staff ratio = (Gross salaries + Social security contributions) / Net revenue × 100
Following successive increases in the minimum wage, staff costs currently represent between 30% and 35% of total costs in many establishments.
Operating expenses
Operating expenses group together all the costs necessary for the restaurant to run day to day: rent, utilities (electricity, water, gas), insurance, maintenance, licences...
Operating expenses = Operating expenses / Revenue × 100
As a benchmark, these expenses should not exceed 20–25% of revenue.
Prime cost
Prime cost combines your two biggest expense items (raw materials and staff) into a single number. It is the indicator that best summarises the operational efficiency of your restaurant.
Prime cost = Food cost + Staff cost ratio
Prime cost should never exceed 60% of your revenue. If it does, your margin to cover the rest of your expenses (rent, utilities, taxes…) and generate profit becomes insufficient.
Practical example: a restaurant with a food cost of 32% and a staff ratio of 33% has a prime cost of 65%. To correct this, it has three levers: raise prices, optimise purchases or reorganise team shifts.
How can you improve profitability and reduce costs in your restaurant?
1. Set the right selling prices for your dishes
The price of each dish cannot be based on intuition or a copy of the competition. It must cover your costs, reflect your positioning and generate a real margin. To set it correctly, you need to take into account:
- the cost of raw materials for each dish;
- the prices of direct competitors in your area;
- your restaurant's positioning (gastronomic, market, casual...);
- the other business overheads (rent, utilities, staff, taxes);
- your customer profile and their willingness to pay.
There are three main methods to calculate the selling price of a dish:
| Method | What it involves | When to use it |
|---|---|---|
| Multiplier coefficient | Multiply the net cost of raw materials for a portion by a fixed coefficient. Net selling price = Raw material cost × coefficient The typical factor ranges between 2.5 and 3.5. | To set prices quickly from the costing sheet. Ideal for long menus or those with many items. |
| Target gross margin | First define the margin you need (e.g. 70%) and calculate the price backwards from there. | To check whether your current menu is consistent with your financial objectives. |
| Omnes' 4 principles | Analyses the overall consistency of menu prices: spread between the cheapest and most expensive dish, weighted average price, visibility of the most profitable dishes. | To audit the menu as a whole, not dish by dish. |
2. Manage stocks well and reduce food waste
Good inventory management is one of the most direct ways to reduce costs in a restaurant without touching prices or staff. Every euro thrown away is margin that disappears.
To control your stocks rigorously:
- Draw up technical sheets for each dish, with the exact weight of each ingredient, the unit cost and the cost per portion;
- Carry out periodic inventories and compare theoretical stock against actual stock;
- Keep a record of stock variations to identify losses (wastage, handling errors, systematic leftovers);
- Negotiate with your suppliers and consolidate orders to reduce purchasing frequency and obtain better terms;
- Train your team in the rational use of ingredients (just as you do with hygiene standards): kitchen waste is usually a habits problem, not a recipe problem.
3. Adjust your menu using menu engineering
Reviewing your menu is not just an aesthetic question. It is a financial decision. Menu engineering is a technique that classifies each dish according to two variables: its popularity and its profitability. The result guides what to keep, what to promote and what to remove.
The four categories are:
- Stars - very popular and very profitable: they are the engine of your business and should be prominently visible on the menu and in the venue's communications.
- Cash cows - very popular but not very profitable: analyse whether you can adjust the recipe, reduce the portion or raise the price without losing customers.
- Puzzles - not very popular but with a good margin: they deserve more visibility; better positioning on the menu or a better description can make the difference.
- Dogs - not very popular and not very profitable: in most cases, the most sensible thing is to remove them. They simplify operations and improve the overall food cost.
Review your menu with this method twice a year, and whenever you notice a drop in margin. It is one of the most concrete actions to optimise your restaurant management without major investment.
4. Maintain rigorous accounting management: the role of the accountant
Your tax adviser goes far beyond balancing the books at year end.
Their typical responsibilities in the hospitality sector include:
- Daily cash management (POS terminal income, expense control);
- Quarterly VAT filing and annual settlement;
- Payroll preparation and management of social security registrations and deregistrations;
- Preparation of the annual balance sheet and profit and loss account;
- Advice on the restaurant's financial projections: revenue forecasting, break-even analysis and investment planning;
- Monitoring of financial ratios against sector benchmarks.
Working with a good accountant from the outset is an investment that pays off quickly. Just as taking care of your restaurant's communication from day one is important, not only when margins are tight.
FAQ
How much does a restaurant earn on average?
For restaurants, a healthy net margin is considered to be between 3% and 5%. That is, for every €100 that comes through the till, between €3 and €5 is net profit after paying all costs.
What is a financial projection for a restaurant?
A financial projection is an estimate of the expected income, expenses and profits for a future period (normally 12 months). It allows you to anticipate cash flow needs, plan investments and detect months of financial strain before they arrive.
What financial management system should I choose for my restaurant?
There is no single solution, but there is a combination that works well for most independent restaurants:
- A POS (Point of Sale) terminal connected to your daily operations, which automatically records sales, average tickets and a breakdown by category.
- Integrated management software, such as Covermanager, which centralises reservations, payments and occupancy data, and offers a dashboard with real-time indicators without the need to export data manually.
- A tax adviser specialising in hospitality, who handles fiscal obligations and helps you interpret financial ratios month by month.
The key is not having the most expensive tool, but having all three elements connected so that data flows without friction.
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