The #1 Reason You Need to Know How to Read Your Restaurant P&L
If you don’t know how to read your P&L, you’re driving blindfolded, and you are sure to crash. You end up making guesses instead of decisions, and that is how profits slip away. Today, I’m going to explain the #1 reason you need to know how to read your restaurant P&L and why it is the most powerful tool in your restaurant.
Reason #1: Your P&L is a scorecard, not a tax form
Too often accountants, CPAs and bookkeepers build your profit and loss statement to file taxes. They follow GAAP — generally accepted accounting principles — which is appropriate for tax and compliance. The problem is that the report you receive often reads like a foreign language. It might be accurate, yet it is not helpful for running your business day to day.
You need a managerial P&L you can read at a glance. Think of it as your scorecard. A yearly P&L is a post-mortem. At minimum, you should have a monthly P&L that closes by a consistent date so you can see, right now, whether you are winning or losing.
Take Bert, who runs a $3.2 million restaurant. He reorganized his books so they close by the 10th of every month and reviews his P&L against his budget. He sees the plan, the actuals and the variances. If he misses a number, he asks which systems managers skipped and retrains or holds them accountable. If the systems were followed, he designs new ones, updates the budget and measures again next month. What we measure improves.
Here is the payoff. If you planned to make $14,000 last month and only made $7,000, you still have many months left in the budget year to make small, smart changes that protect guest satisfaction and product quality while earning back that $7,000. That is the power of a restaurant’s P&L and the #1 reason you need to know how to read your P&L.
Reason #2: Your P&L shows you where the money hides
When you build a budget, you go line by line through everything you spend. Leaks hide in sales categories, prime cost, controllable expenses and operating expenses. Your P&L is how you uncover them.
Consider Tracy. He and his team started using what I call the Restaurant Checkbook Guardian, a simple budgeting system that ties ordering and weekly targets to the budget. On paper, his food cost looked fine. The P&L and weekly controls told the truth. A half-empty walk-in was masking theft, waste and spoilage. Once the numbers could no longer lie, the team stopped the bleeding.
Reason #3: Your P&L buys you control and freedom
Reading your P&L is not bookkeeping. It is leadership. Your budget is the plan. Your P&L is how you actually performed. Put them side by side to see where you hit or missed, then lead change based on facts.
Bert learned that knowing his numbers helps him stop fraud, plug leaks and make data-driven decisions. That is prosperity. Deja learned this too. Even though her husband is a CPA, she realized she had to know the numbers to run the restaurant. Now she looks forward to reviewing her P&L every month because it gives her control of her future. The power is in the numbers.
The #1 reason you need to know how to read your restaurant’s P&L is it the truth about your business. Learn it and live it, and you will earn the control every restaurant pro craves. Control buys freedom. Freedom to grow. Freedom to step back. Freedom to enjoy the life you have worked so hard to build.
