Restaurant financial management requires vigilance, systematic processes, and data-driven decision making. This comprehensive guide covers cost control strategies, key performance indicators, and profitability optimization techniques.

Understanding Restaurant Financial Basics Restaurant profit margins typically range from 3-5% for full-service establishments, 6-9% for fast casual concepts. Thin margins demand precise cost control and revenue optimization.

Prime Cost Management Prime cost (food costs plus labor costs) should remain below 60-65% of revenue. This critical metric indicates operational efficiency. Monitor prime cost weekly, addressing variances immediately.

Food Cost Control Systems Target food costs between 28-35% of menu prices depending on concept. Track actual costs against ideal costs from standardized recipes. Investigate variances exceeding 2-3% immediately.

Portion Control and Standardized Recipes Standardized recipes with precise measurements ensure consistency and cost control. Train staff on proper portioning using scales, measures, and specialized portioning tools.

Inventory Management Best Practices Conduct regular physical inventory counts (weekly or biweekly). Calculate inventory turnover rates—optimal ranges vary by item category. Slow-moving inventory ties up capital and risks spoilage.

Labor Cost Optimization Labor costs should remain below 30-35% of revenue. Schedule based on anticipated volume, not fixed patterns. Cross-train employees for flexibility. Monitor overtime carefully—it rapidly increases labor costs.

Menu Engineering for Profitability Analyze menu items' profitability and popularity. Promote high-profit items, improve or remove unprofitable ones. Strategically price items considering food costs, competition, and perceived value.

Revenue Per Available Seat Hour (RevPASH) Maximize revenue by optimizing table turns, average checks, and seat occupancy. Calculate RevPASH to identify improvement opportunities during different dayparts.

Vendor Negotiations and Purchasing Compare pricing across multiple vendors regularly. Negotiate volume discounts and payment terms. Join purchasing cooperatives for better pricing. Review invoices carefully for overcharges.

Break-Even Analysis and Cash Flow Understand your break-even point—fixed costs divided by contribution margin. Maintain adequate cash reserves covering 3-6 months operating expenses. Project cash flow monthly anticipating seasonal variations.

Financial Reporting and Analysis Review profit and loss statements monthly minimum. Track daily sales, weekly labor and food costs. Compare actual performance against budgets. Data-driven decisions improve profitability systematically.