Category: 💰 Finance | Reading time: 10-12 min
The entrepreneur checks the register every evening. “We made 3,000 AZN today,” he says. He’s happy. But at the end of the month, he looks at the account — there’s no money. Where did it go? He doesn’t know. Because he doesn’t read the P&L statement. Maybe he doesn’t even know what a P&L is.
This is the story of hundreds of restaurants in Azerbaijan. The register is full, but the pocket is empty. Because revenue ≠ profit. Revenue is the money that comes into your register. Profit is the money that remains in your hand after all expenses. The only way to see the difference between the two is the P&L statement.
╔══════════════════════════════════════════════════════════╗ ║ 🎤 ROGER FIELDS ║ ║ Author of “Restaurant Success by the Numbers” ║ ║ One of the rare people who have been both an accountant ║ ║ and a restaurant owner ║ ║ ║ ║ “90% of restaurants fail, but most fail not because of ║ ║ bad food, but because of poor money management.” ║ ║ ║ ║ 📖 Restaurant Success by the Numbers ║ ║ 🔗 The P&L is the most essential tool of this ║ ║ “money management.” If you don’t read it, you’re ║ ║ managing blindfolded. ║ ╚══════════════════════════════════════════════════════════╝
What is P&L? In 3 sentences
P&L (Profit & Loss Statement) — An income and expense report. It shows how much money came in, how much was spent, and how much is left over a period (usually one month).
This is your restaurant’s health report card. The doctor looks at your blood test and says, “Your sugar is high.” You look at your P&L and say, “Your food cost is high.” It’s the same thing — except this time the patient is your restaurant.
P&L Structure — The Simplest Explanation
We divide the P&L into 5 parts:
1. REVENUE (Sales)
All money coming from the register. Food, drinks, banquets, delivery — all of it.
Food sales: 65,000 AZN
Beverage sales: 15,000 AZN
Delivery sales: 12,000 AZN
Banquet revenue: 8,000 AZN
─────────────────────────────────────────
TOTAL REVENUE: 100,000 AZN
2. FOOD COST (COGS — Cost of Goods Sold)
The cost of ingredients for the food sold. Food cost falls under this.
Food ingredients: 30,000 AZN
Beverage ingredients: 4,500 AZN
Packaging (delivery): 1,200 AZN
─────────────────────────────────────────
TOTAL COGS: 35,700 AZN
COGS %: 35.7%
3. GROSS PROFIT
Gross Profit = Revenue - COGS
100,000 - 35,700 = 64,300 AZN (64.3%)
This is the “raw profit” — rent, salaries, and utilities haven’t been paid yet.
4. OPERATING EXPENSES
Here’s everything:
Staff salaries: 25,000 AZN (25%)
Rent: 10,000 AZN (10%)
Utilities (electricity, gas, water): 3,500 AZN (3.5%)
Social Security Fund (DSMF): 1,000 AZN (1%)
Marketing/advertising: 1,500 AZN (1.5%)
Repairs/technical service: 800 AZN (0.8%)
Insurance: 500 AZN (0.5%)
Music license: 100 AZN (0.1%)
Accounting/legal: 600 AZN (0.6%)
Other expenses: 1,000 AZN (1%)
─────────────────────────────────────
TOTAL OPERATING EXPENSES: 44,000 AZN (44%)
5. NET PROFIT
Net Profit = Gross Profit - Operating Expenses
64,300 - 44,000 = 20,300 AZN
Net Profit %: 20.3%
This number — 20,300 AZN — is your real earnings. Out of 100,000 AZN in revenue, this is what remains in your hand.
⚠️ Warning: The example above is idealized. In Baku, the net profit % of most restaurants is between 5-15%. If you see 20%, you’re managing very well. If it’s below 5%, you’re in the danger zone.
Ideal Percentages — The Restaurant’s “Healthy Blood Values”
Remember these numbers — they should be your “normal”:
| Expense item | Ideal % (relative to revenue) | Danger threshold |
|---|---|---|
| Food cost (COGS) | 28-33% | 38%+ |
| Staff expenses (salary + DSMF) | 25-30% | 35%+ |
| Rent | 6-10% | 12%+ |
| Utilities | 3-5% | 7%+ |
| Total expenses | 85-92% | 95%+ |
| Net profit | 8-15% | Below 5% |
Golden rule: Food cost + Staff expenses = Prime Cost (core cost). This should not exceed 55-65% of revenue. If it exceeds 65% — warning. If it exceeds 70% — emergency.
╔══════════════════════════════════════════════════════════╗ ║ 🎤 DONALD BURNS ║ ║ “The Restaurant Coach”, restaurant consultant ║ ║ ║ ║ “Restaurant owners love designing menus but avoid ║ ║ reading P&L statements. A beautiful menu doesn’t ║ ║ fill your register.” ║ ║ ║ ║ 📖 Your Restaurant Sucks! ║ ║ 🔗 In Baku, this has reached epidemic levels. An ║ ║ owner spends 2 weeks on menu design and 0 minutes ║ ║ on the P&L. ║ ╚══════════════════════════════════════════════════════════╝
How to Read a P&L — A 5-Minute Analysis
You’ve received your P&L. What should you check in 5 minutes?
Minute 1: Check food cost %. If it’s above 33%, there’s a problem in the kitchen. Recipe cards need to be verified, waste must be reduced, suppliers must be compared.
Minute 2: Check staff expenses. If it’s above 30%, either you have too many people or the operation is inefficient. Review shift planning — are you overstaffed during peak hours and understaffed during slow times?
Minute 3: Check prime cost. If food cost + staff expenses exceed 65%, serious changes are needed. These two items are the main reasons restaurants fail.
Minute 4: Check rent %. If it’s above 10%, you need to either increase sales (rent is fixed, so the percentage drops as sales increase) or negotiate the rent.
Minute 5: Check net profit. If it’s below 8%, problems have accumulated. You already know which of the items above is causing the issue.
📝 DOĞAN’S NOTE: “Learning to read a P&L takes one hour. But that one hour will save you thousands of manats each month. I tell an owner, ‘Let’s look at your P&L,’ and he says, ‘My accountant does that.’ Your accountant looks at it — but your accountant doesn’t manage your restaurant. You do. You must read it.”
Monthly P&L Comparison — See the Trend
A single month’s P&L is useful. But the real power is in monthly comparison. Place three months of P&Ls side by side:
| Item | January | February | March | Trend |
|---|---|---|---|---|
| Revenue | 85,000 AZN | 92,000 AZN | 88,000 AZN | ↗️ then ↘️ |
| Food cost % | 32% | 34% | 37% | ⚠️ Increasing! |
| Staff % | 28% | 27% | 29% | → Stable |
| Net profit % | 12% | 10% | 6% | 🔴 Dropping! |
From this table, you can see: revenue remained stable, but food cost increased by 5 percentage points (32%→37%). As a result, net profit dropped by half (12%→6%). The problem is in the kitchen — ingredient costs are rising, either suppliers have raised prices, waste has increased, or portion sizes have grown.
Without seeing this — you say “everything is fine.” With the P&L, you see the problem in the first month, fix it in the second month, and by the third month the register is healthy again.
╔══════════════════════════════════════════════════════════╗ ║ 🎤 DANNY MEYER ║ ║ Founder of Union Square Hospitality Group, NYC ║ ║ ║ ║ “True leadership doesn’t start from the chair, ║ ║ it starts from the numbers. An owner who doesn’t ║ ║ know his people or control his processes cannot ║ ║ control his customers.” ║ ║ ║ ║ 📖 Setting the Table ║ ║ 🔗 Meyer manages 100+ restaurants. The monthly ║ ║ P&L for each one is on his desk. You don’t read ║ ║ the P&L for your single restaurant? ║ ╚══════════════════════════════════════════════════════════╝
“But I Have an Accountant” — That’s Not Enough
The accountant works for tax purposes. He calculates your taxes correctly, pays the DSMF, and files declarations. But the accountant’s job is not to increase your restaurant’s profitability.
Reading the P&L is your job. Because:
- The accountant doesn’t know why food cost increased — you know the kitchen
- The accountant doesn’t measure staff efficiency — you know the shifts
- The accountant doesn’t suggest menu changes — you know the customer
- The accountant doesn’t compare suppliers — you know the ingredients
The accountant gives you numbers. You read those numbers and make decisions. These are separate jobs.
P&L — Not Monthly, Weekly
The global standard is monthly P&L. But in Baku, especially for newly opened restaurants, I recommend a weekly mini P&L.
Not a full P&L — a simplified version:
This week:
├── Revenue: 18,500 AZN
├── Food purchases: 6,200 AZN (33.5%)
├── Staff expenses: 5,100 AZN (27.6%)
├── Prime cost: 11,300 AZN (61.1%) ✅
└── Other fixed: 4,500 AZN
────────────────────
Weekly result: 2,700 AZN (14.6%) ✅
This is a 5-minute calculation. Every Sunday sit down and write these numbers. Write them for 4 weeks — you’ll see the trend. Problems will appear weeks earlier, without waiting for the monthly P&L.
╔══════════════════════════════════════════════════════════╗ ║ 🎤 ANTHONY BOURDAIN ║ ║ Chef, author of Kitchen Confidential ║ ║ ║ ║ “The restaurant business constantly teaches you ║ ║ humility.” ║ ║ ║ ║ 📖 Kitchen Confidential ║ ║ 🔗 The P&L is the numerical form of that humility. ║ ║ It shows you that when you see 100,000 AZN in the ║ ║ register, only 8,000 AZN stays in your hand. But to ║ ║ see that 8,000 AZN, you must first open the P&L. ║ ╚══════════════════════════════════════════════════════════╝
P&L CHECKLIST — Start This Month
| # | Step | Status |
|---|---|---|
| 1 | Request the last 3 months’ P&L from your accountant | ☐ |
| 2 | Check food cost % (if above 33%, see our “Food Cost” article) | ☐ |
| 3 | Calculate prime cost (Food + Staff, should be below 65%) | ☐ |
| 4 | Calculate rent % (should be below 10%) | ☐ |
| 5 | Calculate net profit % (should be 8%+) | ☐ |
| 6 | Compare the 3-month trend — increasing or decreasing? | ☐ |
| 7 | Start a weekly mini P&L — 5 minutes every Sunday | ☐ |
| 8 | If prime cost exceeds 65%, call an emergency meeting: kitchen + finance | ☐ |
💡 DK Agency: Do you want a ready-made P&L template? In the DK Agency Toolkit, there is a P&L template tailored to Azerbaijani realities — start filling it in, and the numbers will speak for themselves. We also offer consulting services for monthly financial audits, food cost optimization, and budget planning.
📧 info@dkagency.com.tr | 🔧 dkagency.com.tr/aletler | 🌐 dkagency.com.tr/aletler/marketinq-ocagi