Can't read a P&L? Then you are not a restaurant owner.

Category: 💰 Finance | Reading time: 10-12 min

Every evening, the business owner checks the cash register. "Today we made 3000₼," he says. He's happy. But at the end of the month, he checks the bank account — there's no money. Where did it go? He doesn't know. Because he doesn't read the P&L report. Maybe he doesn't even know what P&L is.

This is the story of hundreds of restaurants in Azerbaijan. The cash register fills up, the pocket empties. Because revenue ≠ profit. Revenue is the money that comes into your cash register. Profit is — after all expenses are deducted — the money left in your hands. The only way to see the difference between these two is the P&L report.

What is P&L? In 3 sentences

P&L (Profit & Loss Statement) — Income and Expense Report. It is a sheet that shows how much money came in, how much was spent, and how much remained over a period (usually 1 month).

This is your restaurant's health card. A doctor looks at your blood test and says "your sugar is high." You look at the P&L and say "your food cost is high." It's the same thing — but this time, the patient is your restaurant.

Structure of the P&L — the simplest explanation

We divide the P&L into 5 parts:

1. REVENUE (Revenue / Sales)

All money coming into the cash register. From food, drinks, banquets, delivery — everything.

Food sales:            65,000₼
Beverage sales:        15,000₼
Delivery sales:        12,000₼
Banquet revenue:        8,000₼
─────────────────────────────
TOTAL REVENUE:        100,000₼

2. FOOD COST (COGS — Cost of Goods Sold)

The cost of ingredients for dishes sold. Food cost is included here.

Food ingredients:        30,000₼
Beverage ingredients:     4,500₼
Packaging (delivery):     1,200₼
─────────────────────────────
TOTAL COGS:              35,700₼
COGS %:                  35.7%

3. GROSS PROFIT

Gross Profit = Revenue - COGS
100.000 - 35.700 = 64,300₼ (64.3%)

This is the "gross profit" — rent, salaries, and utilities have not been paid yet.

4. OPERATING EXPENSES

Here is everything:

Employee salaries:         25,000₼  (25%)
Rent:                     10,000₼  (10%)
Utilities (electricity, gas, water): 3,500₼  (3.5%)
DSMF:                      1,000₼  (1%)
Marketing/advertising:     1,500₼  (1.5%)
Repairs/technical service:    800₼  (0.8%)
Insurance:                   500₼  (0.5%)
Music license:               100₼  (0.1%)
Accounting/legal:            600₼  (0.6%)
Other expenses:            1,000₼  (1%)
─────────────────────────────
TOTAL OPERATING:         44,000₼  (44%)

5. NET PROFIT (Net Profit)

Net Profit = Gross Profit - Operating Expenses
64.300 - 44.000 = 20.300₼
Net Profit %: 20.3%

This number — 20.300₼ — is your real profit. From 100.000₼ revenue, this is what remains.

Ideal percentages — the restaurant's "healthy blood values"

Remember these numbers — they should be your "normal":

Golden rule: Food cost + Labor costs = Prime Cost (main cost). This should not exceed 55-65% of revenue. If it exceeds 65% — warning. If it exceeds 70% — emergency.

How to Read P&L — 5-Minute Analysis

You have the P&L in hand. What should you look at in 5 minutes?

Minute 1: Look at Food Cost %. If it's above 33% — there's a problem in the kitchen. Recipe cards should be checked, waste should be reduced, suppliers should be compared.

Minute 2: Look at Labor Costs. If it's above 30% — either there are too many staff, or operations are not efficient. Check shift planning — are there too many during peak hours, too few during slow hours?

Minute 3: Look at Prime Cost. If Food Cost + Labor is above 65% — serious changes are needed. These two items are the main factors that sink a restaurant.

Minute 4: Look at Rent %. If it's above 10% — either you need to increase sales (rent is fixed, as sales increase the % drops) or you need to negotiate the rent.

Minute 5: Look at Net Profit. If it's below 8% — problems have accumulated. You already know which of the above items has a problem.

Monthly P&L Comparison — See the Trend

A one-month P&L is useful. But the real power is monthly comparison. Put the P&L of 3 months side by side:

From this table you see: revenue remained stable, but food cost increased by 5 percentage points (32%→37%). As a result, net profit halved (12%→6%). The problem is in the kitchen — either food costs are rising, suppliers have raised prices, waste has increased, or portions have grown.

Without seeing this — you say "everything is fine." With P&L — you see the problem in month 1, solve it in month 2, and in month 3 the cash flow improves.

"But I have an accountant" — is not enough

An accountant works for tax purposes. They calculate your tax correctly, pay the Social Security Fund, and submit declarations. But the accountant's job is not to increase your restaurant's profitability.

Reading the P&L is your job. Because:

• The accountant doesn't know why the food cost increased — you know the kitchen
• The accountant doesn't measure employee efficiency — you know the shifts
• The accountant doesn't suggest menu changes — you know the customer
• The accountant doesn't compare suppliers — you know the groceries

The accountant gives you the numbers. You read those numbers and make decisions. These are separate tasks.

P&L — Look at weekly, not monthly

World standard: monthly P&L. But in Baku, especially for newly opened restaurants, my recommendation: weekly mini P&L.

It's not a full P&L — a simplified version:

This week:
├── Revenue:           18,500 ₼
├── Food purchases:     6,200 ₼  (33.5%)
├── Labor costs:        5,100 ₼  (27.6%)
├── Prime Cost:        11,300 ₼  (61.1%) ✅
└── Other fixed:        4,500 ₼
    ────────────────────
    Weekly result:      2,700 ₼  (14.6%) ✅

This is a 5‑minute calculation. Sit down every Sunday and write these numbers down. Write for 4 weeks — you'll see the trend. Problems will become visible weeks earlier without waiting for the monthly P&L.

P&L CHECKLIST — Start This Month