How to Budget a Restaurant: Create Your Perfect Restaurant Budget

Setting up a restaurant without an actual budget in mind is like travelling without a destination. It is possible that you may get success early on, but most likely you are going to face a disaster. By having a solid budget beforehand, you can control your costs and keep the restaurant profitable. Let us look at how to budget a restaurant which will yield results.

Start with Your Revenue Goals

Before you begin budgeting the expenses, you must know how much money you want to earn. Look at competitor restaurants in your area and if possible find out about their expenses.

Break down the revenue by different sources. This will comprise of dine-in sales, takeout, delivery, tracking, catering and bar sales. Each of these revenue streams will behave differently throughout the year, so track them separately.

The Prime Cost Rule

Your prime cost is the sum of food costs and labor costs. This will remain your most important number while budgeting. Keep the prime cost at 60% or less of the total revenue.

Remember food costs must be around 28-35% of the revenue. The labor costs should always stay between 25-35%. Together they must never exceed 60%. This will leave 40% for other expenses and profit.

Analyze the Food and Beverage Costs

Make a list of all the ingredients that go into your dishes. Then you must calculate the food cost percentage of your restaurant. This you can do by dividing the total food costs by sales. So, if you have spent 100,000 Rs on ingredients and made 350,000 Rs in the food sales your cost is 28.5% which is healthy.

Apart from that, don’t forget about wastage. Spoiled ingredients, mistakes in kitchen and over portioning all eat up your profits.

Get Labor Costs Under Control

Labor is usually the second-biggest expense after food. This includes wages, taxes, benefits, worker’s compensation and overtime.

Create a weekly schedule based on the expected customer traffic. You will need more staff on a Friday night than a Tuesday lunch. Use sales per labor as a guide so if one server is generating 1500 Rs in sales per hour, you know just how many servers you need based on your expected revenue.

Fixed vs Variable Costs

Fixed costs will stay the same every month, regardless of your sales. These include rent, insurance licenses, loan payments and salaries for managers. Total up the fixed costs first. You need to cover these even on the slow days.

Variable costs change based on how much traffic is coming. Food, hourly labor, cleaning supplied, and takeout containers are variable costs. These will scale with the revenue making them easy to manage.

Don't Forget the Hidden Costs

Many restaurant owners forget about the expenses that don’t arise monthly. You must set aside money each month for:

·       Equipment repairs and replacement

·       Deep cleaning and replacement

·       Seasonal decorations

·       Marketing and advertising

·       Menu printing

·       Staff training

·       Unexpected emergencies

A good rule usually is to budget 3-5% of the revenue for maintenance and repairs. Equipment breaks, and there is no fixed time when that will happen.

Build in Profit

Your restaurant business budget isn’t complete without any planning for profit. Target at least 10-15% net profit. After all the expenses this is what you get to keep. If your numbers do not show profit you have three options, increase the prices, cut costs or get in more customers. Most of the successful restaurants do all these three constantly.

Track Everything Weekly

Create a simple spreadsheet with the budgeted amounts and actual amounts. Check this every week so you can spot any problems. You must compare actual food cost percentage to the budgeted percentage. If its higher dig into why? Maybe the portions are big, or the supplier raised prices.

Repeat this for labor. If you are spending more than budgeted for labor, but the revenue is flat, you are most likely overstaffed. The team at Quadriganxt would help if you are thinking of how to create a restaurant budget.

Use Technology to Help

Modern POS systems track the sales, inventory and labor automatically. Start using these tools. They save time and provide accurate data for better restaurant budgeting. Accounting software that is designed for restaurants can categorize your expenses automatically and show how you are tracking against budget.

Conclusion

A restaurant budget isn’t something you create once and then forget. It is a useful document that will guide your daily decisions. Check it often, adjust it when needed and use it to keep the restaurant profitable. The restaurants that are successful are the ones that know their numbers and manage them effectively.

FAQ

1. What is the budget of a restaurant?
A restaurant budget covers expenses like rent, food, salaries, utilities, and marketing to manage operations and ensure steady profits.

2. What is the 30/30/30/10 rule for restaurants?
The 30/30/30/10 rule divides restaurant revenue—30% for food cost, 30% for labor, 30% for overhead, and 10% for profit.

3. How to prepare a budget for a restaurant?
Prepare a restaurant budget by estimating monthly revenue, tracking costs, managing expenses, and adjusting based on sales projections and performance.

4. What are the 4 types of budget?
The four budget types are static, flexible, operational, and financial—helping restaurants plan resources, forecast profits, and control costs effectively.