Enter your monthly revenue, food cost, labor, rent, and overhead to see your net margin and how it compares to industry benchmarks.
The average restaurant net profit margin is 3-9%. Fast food and counter service businesses run 6-9%. Full-service restaurants typically earn 3-5% net. A restaurant with $1M in revenue and 5% net profit keeps $50,000. Food cost, labor, and rent are the three largest cost categories.
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Try LeadLock Free First month free. No credit card required.A healthy restaurant net profit margin ranges from 3-9%. Fast food and counter-service concepts typically achieve 6-9%. Full-service restaurants earn 3-5% on average. Catering and food truck operations can reach 10-15% with lower overhead. Below 3% is a warning sign that costs need attention.
Prime cost is food cost plus labor cost, expressed as a percentage of revenue. It is the most important profitability metric for restaurants. Healthy restaurants keep prime cost below 60%. Above 65% means the two largest cost categories are eating your profit before rent and overhead are even counted.
Food cost is typically 28-35% of revenue. Every 1 point improvement in food cost percentage goes directly to the bottom line. A restaurant doing $1M in revenue that drops food cost from 33% to 32% gains $10,000 in annual profit without changing revenue.
Industry benchmark is 25-35% of revenue for labor. Fast food runs 25-28%. Full-service runs 30-35%. Above 35% usually signals overstaffing or low revenue per labor hour. Track covers per labor hour (or sales per labor hour) to catch inefficiencies early.
Rent and occupancy should not exceed 8-10% of revenue for a healthy restaurant. Above 12-15% is difficult to overcome with margin improvements elsewhere. If rent is high, the only solutions are growing revenue or renegotiating the lease. Choosing a location with manageable rent is one of the most important decisions you can make.
Most restaurant failures are caused by undercapitalization (not enough cash to survive the ramp-up), underpricing (food cost and labor not properly modeled), and location mistakes (rent too high for the traffic level). Use this calculator before opening to test whether your revenue projections produce a viable profit margin.
Focus on three levers: reduce food waste (track daily waste, standardize portions), improve labor scheduling (cut overstaffed shifts, use demand-based scheduling), and increase average ticket (upsell, prix fixe menus, premium add-ons). Each 1-point improvement in net margin on $1M revenue is worth $10,000.
This calculator is for informational purposes only. Results are estimates based on the inputs you provide. Consult a qualified financial professional before making business decisions.