Take control of your business with this downloadable profit margin formula Excel template for restaurants.
If you want to boost profits, you’ve got to know your numbers first. Our profit margin formula Excel template tells the story of your restaurant’s financial success and offers valuable business insights. Without knowing your profit margin, you’re essentially running your business blind.
Luckily, calculating your restaurant’s profit margin doesn’t require a fancy finance degree. With our free template, you can easily calculate your profit margin and find out if you’re on par with (or falling behind) the industry average of 10.6%.
What Is a Profit Margin?
Profit margin measures how much your business is earning compared to how much it’s spending. When your restaurant earns more than it spends, it’s profitable. When it generates the same amount of revenue as it spends, the business is “breaking even.” And if it’s making less than it spends, the business isn’t profitable and you should look into strategies for turning that around.
To understand how to find your profit margin, you need to know what a profit is. Profit measures the difference between how much your restaurant makes versus how much it spends.
Therefore, the formula for profit is:
Profit = Revenue – Cost of Goods Sold
Cost of goods sold is the sum of all of your restaurant’s expenses, such as ingredients, labor, and rent. You can find your restaurant’s revenue and its costs in your POS reports.
Profit Margin Formula
To calculate your restaurant’s profit margin, you need to divide profit by revenue.
Profit Margin = Profit / Revenue
When we substitute “Profit” for the profit formula, the formula for profit margin becomes:
Profit Margin = (Revenue – Cost of Goods Sold)/Revenue
Why Is It Important to Know a Restaurant’s Profit Margin?
You should know your restaurant’s profit margin to:
- Understand your finances: Your profit margin can tell you if your business is sustainable.
- Attract investors: If you have higher-than-average margins, you might be able to get investments from external stakeholders.
- Understand how you’re doing compared to the competition.
- Understand how you’re performing compared to previous years.
- Make business decisions: Your profit margin could lead you to change menu prices and portion sizes, change vendors, spend less on labor or hire more staff, move to a space with cheaper rent, or expand your business.
Average Restaurant Industry Profit Margin
The average restaurant industry profit margin is 10.6%, according to TouchBistro’s 2023 State of Restaurants Report. However, this figure varies depending on the size of the restaurant. Small restaurants (those with 20 seats or fewer) have a 7% profit margin, while large restaurants (those with 120+ seats) have a 13% profit margin.
What to Expect from this Restaurant Profit Margin Formula Excel Template
You can use our free restaurant profit margin formula Excel template to track your profits and margins throughout the year. The profit margin spreadsheet is split up into quarters to encourage you to check your numbers regularly.
First, the template guides you through calculating your total sales. You can find this information in your POS, or manually calculate it by item category.
Then, the profit margin formula Excel template walks you through calculating your total costs of goods sold. We’ve broken this up into lots of categories (including wages, operational expenses, maintenance and repairs, and fixed expenses) so you don’t leave anything out.
After you find your sales and costs, the template automatically calculates your profit and profit margin.
Download this free profit margin formula Excel template today to take control of your restaurant’s finances.