How Much Does a Restaurant Earn?

The net profit of the restaurant can be very difficult to determine. Restaurants tend to be notorious for being run by owners was second books for people that are hiding some of the cash profit. Tax returns are not always a reliable source of profitability. Business owners prefer not to pay a lot of tax.

Click here to find an updated list of over 100 great restaurants for sale in Florida

Conduct a thorough due diligence. Don’t try to do this on your own. Recruit a good attorney, accountant, and industry expert put on your team for determining the right location for you. You may have to look at a lot of different resources such as register tapes, bank deposits, purchase receipts of food and paper, and many other resources.

If you can determine the gross annual sales and got a large part of the hard work done. There are some things you can verify easily such as rent. Remember many people pay a base rent plus common area maintenance fees so confirm the total amount of rent being charged. As a general rule of thumb, rent should be less than 10% of the gross annual sales. Some say that the rent should be no more than 8%.

Here are some other percentages to consider. They come from the 2016 business reference guide. They are only general numbers. Every restaurant has the unique set of numbers. But you can still use these figures to determine if something is out of whack with the financials. Again recruit professional support wherever you are not 100% comfortable with analyzing the business that you’re requiring.

Now, here are the numbers from Business Reference Guide:

Prime Cost (food cost and labor cost combined)

  • Full-service—65% or less of total sales
  • Table-service—60% or less of total sales

Food Cost

  • Generally—28% to 32% of total food sales

Alcoholic Beverage Costs

  • Liquor—18% to 20% of liquor sales
  • Bar consumables—4% to 5% of liquor sales
  • Bottled beer—24% to 28% of bottled beer sales
  • Draft beer—15% to 18% of draft beer sales
  • Wine—35% to 45% of wine sales

Nonalcoholic Beverage Costs

  • Soft drinks (post-mix) 10% to 15% of soft drink sales
  • Regular coffee—15% to 20% of regular coffee sales
  • Specialty coffee—12% to 18% of specialty coffee sales
  • Iced tea—5% to 10% of iced tea sales

Paper Cost

  • Full-service—1% to 2% of total sales
  • Limited-service—3% to 4% of total sales

Payroll Cost

  • Full-service—30% to 35% of total sales
  • Limited-service—25% to 30% of total sales

Management Salaries

  • 10% or less of total sales

Hourly Employee Gross Payroll

  • Full-service—18% to 20% of total sales
  • Limited-service—15% to 18% of total sales

Employee Benefits

  • 5% to 6% of total sales
  • 20% to 23% of gross payroll

Sales per Square Foot

  • Losing Money: Full-service—$150 or less; Limited-service—$200 or less
  • Break-even: Full-service—$150 to $250; Limited-service—$200 to $300
  • Moderate Profit: Full-service—$250 to $350; Limited-service—$300 to $400
  • High Profit: Full-service—More than $350; Limited-service—More than $400

Rent and Occupancy

  • Rent—6% or less of total sales
  • Occupancy—10% or less of total sales”

Source: Information provided by Jim Laube, founder of www.RestaurantOwner.com

“Profitability Standards