Key takeaways
- Track prime cost (food + labor) every week. It's the biggest controllable cost in a restaurant.
- A rolling 13-week cash flow forecast shows a crunch coming weeks in advance.
- Clean books and steady bank balances lead directly to faster approvals and better loan terms.
The numbers that matter most
| Metric | What it is | Common target (varies by concept) |
|---|---|---|
| Food (and beverage) cost | Cost of food and drinks sold ÷ food and beverage sales | ~28%–35% |
| Labor cost | All wages, taxes, and benefits ÷ sales | ~25%–35% |
| Prime cost | Food + beverage + labor costs ÷ sales | ~60%–65% or lower |
| Occupancy cost | Rent, CAM, property tax ÷ sales | ~6%–10% |
| Net profit margin | Profit after all expenses ÷ sales | Often low to mid single digits |
A weekly finance routine
- Monday: review last week's sales by daypart, and compare to last year
- Inventory count: count high-value items weekly and calculate actual food cost
- Labor check: compare scheduled vs. actual hours and labor % by day
- Cash flow: update a rolling 13-week forecast with payroll, rent, vendor payments, and loan payments
- Reconcile: match POS deposits to bank deposits so nothing goes missing
Cash flow forecasting
Profit and cash aren't the same. A profitable month can still leave you short if quarterly taxes, a big food order, and three payrolls hit together. A 13-week forecast shows those collisions in advance, so you can set up a line of credit before you need it, not after.
Tips and payroll taxes
- Large food and beverage establishments where tipping is customary generally file IRS Form 8027 each year to report receipts and tips
- Many restaurant employers can claim a credit for the employer share of Social Security and Medicare taxes paid on certain tips (Form 8846). Ask your CPA
- Keep sales tax and payroll tax money separate. Falling behind on them is one of the fastest ways to lose loan eligibility
What lenders see when they look at your finances
- Steady deposits without wild swings
- Few or no overdrafts or returned payments
- A reasonable average daily balance
- No stacked cash advances
- Current taxes
Clean numbers? See how much your restaurant could qualify for.
Get my numbersFrequently asked questions
What is a good prime cost for a restaurant?
Many operators aim for prime cost (food, beverage, and labor) around 60%–65% of sales or lower, though the right target depends on your concept and service style.
How often should a restaurant review its finances?
Weekly for sales, prime cost, and cash flow; monthly for a full P&L and balance sheet.
Sources
We cite primary sources: federal agencies, regulations, and official program rules. Rules vary by state and change over time.
General education, not legal, tax, or financial advice. Loan programs, licensing rules, and lender requirements change and vary by state. Disclosures.