Restaurant Owners' Best Practices Guide:
Accounting & Financial Management
Running a profitable restaurant requires more than just great food and service—it demands smart financial management. A restaurant’s success hinges on a combination of well-planned pricing strategies, strict cost control, and proactive financial tracking. Without a clear understanding of revenue flow and expenses, even the most popular establishments can struggle to stay afloat.
This guide provides a comprehensive look at the financial best practices that will help restaurant owners boost profitability. From menu pricing techniques to labour cost management and expense optimisation, each section is designed to offer actionable insights for long-term success. Whether you’re launching a new restaurant or improving an existing one, implementing these strategies will enhance efficiency and financial stability.
Menu Pricing Strategies
1. Understanding Food Costs
- Calculate ingredient costs per dish.
- Factor in preparation waste and portion sizes.
- Formula: Food Cost Percentage = (Cost of Ingredients / Menu Price) x 100.
- Ideal food cost percentage: 28% - 35%.
2. Menu Pricing Methods
- Cost-based pricing: (Total Cost x Markup) = Selling Price.
- Competitive pricing: Research competitors and adjust accordingly.
- Psychological pricing: Use strategies like $9.99 instead of $10.00.
- Bundling & upselling: Offer combo deals to increase ticket size.
3. Beverage Pricing
- Aim for a 20% - 25% beverage cost percentage.
- Use a 4x markup for liquor and a 3x markup for wine.
Controlling Cost of Goods Sold (COGS) & Labour Costs
1. COGS Management
- Keep COGS between 28% - 35% of revenue.
- Conduct weekly inventory checks to reduce waste and prevent theft.
- Build strong supplier relationships for better pricing.
- Implement portion control with kitchen scales and recipes.
2. Labour Cost Control
- Maintain labour costs at 25% - 35% of revenue.
- Optimize staff scheduling based on sales trends.
- Cross-train employees to improve efficiency.
- Monitor overtime and reduce unnecessary hours.
3. Ideal Cost Breakdown
| Expense | Recommended % of Revenue |
|---|---|
| COGS | 28% - 35% |
| Labour | 25% - 35% |
| Rent/Lease | 6% - 10% |
| Utilities | 3% - 5% |
| Marketing | 3% - 6% |
| Net Profit Margin | 10% - 15% |
4. Venue Expense Management
- Rent should not exceed 6% - 10% of gross revenue.
- Keep utilities within 3% - 5% of revenue.
- Allocate 3% - 6% of revenue to marketing efforts.
Optimising Profit Margins
- Aim for a 10% - 15% net profit margin.
- Reduce waste with strict portion control.
- Increase efficiency through automation & technology.
- Implement a strong upselling and cross-selling strategy.
Financial Tracking & Reporting
1. Key Performance Indicators (KPIs)
- Prime Cost: (COGS + Labor) under 60% of revenue.
- Break-even Point: Understand how much revenue you need to cover expenses.
- Table Turnover Rate: Increase efficiency and revenue per seat.
- Average Check Size: Track to assess upselling effectiveness.
2. Accounting Best Practices
- Use accounting software like QuickBooks or Xero.
- Conduct daily cash flow tracking & reconciliation.
- Maintain accurate payroll records.
- Review Profit & Loss (P&L) statements monthly.
By applying these financial management best practices, restaurant owners can maintain stability, control costs, and maximize profitability. Small changes—such as strategic pricing, cost control, and regular financial tracking—can make a significant impact on success. Smart technology like Ai Menu can help you keep your finger on the pulse of your business for cost control and optimisation. Get in touch with our team today to see how your business can improve with Ai Menu.
