Can't read a P&L? Then you are not a restaurant owner.

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The owner looks at the cash register every evening. "Today brought in 3000₼," 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 cash register fills up, the pocket empties. Because revenue ≠ profit. Revenue is the money that comes into your cash register. Profit, however, is — the money left in your hand after all expenses are deducted. The only way to see the difference between these two is the P&L statement.

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What is P&L? In 3 sentences

P&L (Profit & Loss Statement) — Income and Expense statement. Over a period of time (usually 1 month) — how much money came in, how much was spent, how much remained — it is a sheet showing these.

This is your restaurant's health card. The doctor looks at the blood test and says "your sugar is high." You look at the P&L and say "your food cost is high." It's the same thing — but this time the patient is your restaurant.

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The structure of P&L — the simplest explanation

We divide the P&L into 5 parts:

1. REVENUE (Revenue / Sales)

All the money coming from the cash register. From food, drinks, banquets, delivery — all of it.

Food sales:           65,000₼
Drink sales:          15,000₼
Delivery sales:       12,000₼
Banquet revenue:       8,000₼
─────────────────────────────
TOTAL REVENUE:       100,000₼

2. FOOD EXPENSE (COGS — Cost of Goods Sold)

The food cost of the dishes sold. Food cost falls here.

Food ingredients:      30,000₼
Drink ingredients:      4,500₼
Packaging (delivery):   1,200₼
─────────────────────────────
TOTAL COGS:            35,700₼
COGS %:                35.7%

3. GROSS PROFIT (Gross Profit)

Gross Profit = Revenue - COGS
100,000 - 35,700 = 64,300₼ (64.3%)

This is "raw profit" — rent, salaries, utilities have not yet been paid.

4. OPERATING EXPENSES (Operating Expenses)

Everything is here:

Employee salaries:         25,000₼  (25%)
Rent:                      10,000₼  (10%)
Utilities (electricity, gas, water): 3,500₼  (3.5%)
Other fees:                 1,000₼  (1%)
Marketing/advertising:      1,500₼  (1.5%)
Repair/maintenance:           800₼  (0.8%)
Insurance:                    500₼  (0.5%)
Music license:                100₼  (0.1%)
Accounting/legal:             600₼  (0.6%)
Other expenses:             1,000₼  (1%)
─────────────────────────────
TOTAL OPERATING:           44,000₼  (44%)

5. NET PROFIT (Net Profit)

Net Profit = Gross Profit - Operating Expenses
64,300 - 44,000 = 20,300₼
Net Profit %: 20.3%

This figure — 20,300₼ — is your real earnings. Out of 100,000₼ in revenue, this is what remains in your hand.

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Ideal percentages — the restaurant's "healthy blood values"

Memorize these numbers — these should be your "normal":

Golden rule: Food cost + Labor costs = Prime Cost. This should not exceed 55-65% of revenue. If it exceeds 65% — warning. If it exceeds 70% — state of emergency.

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How to read a P&L — a 5-minute analysis

The P&L is in your hands. What should you look at in 5 minutes?

Minute 1: Look at food cost %. If it's above 33% — there's a problem in the kitchen. Recipe cards should be checked, waste reduced, suppliers compared.

Minute 2: Look at labor costs. If it's above 30% — either there are too many people, or operations aren't efficient. Check the shift planning — too many during peak hours, too few during quiet hours?

Minute 3: Look at Prime Cost. If food cost + labor = above 65% — serious change is needed. These two items are the main factor that sinks restaurants.

Minute 4: Look at rent %. If it's above 10% — either you need to increase sales (rent is fixed, so as sales rise the % falls), or you need to enter rent negotiations.

Minute 5: Look at net profit. If it's below 8% — problems have piled up. You already know which of the items above has the problem.

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Monthly comparison of the P&L — see the trend

A single month's P&L is useful. But the real power is in the monthly comparison. Put 3 months of P&L side by side:

From this table you can see: revenue has stayed flat, but food cost has risen by 5 percentage points (32%→37%). As a result, net profit has fallen by half (12%→6%). The problem is in the kitchen — food expenses are rising, either suppliers have gotten more expensive, or waste has increased, or portions have gotten bigger.

Without seeing this — you say "everything is fine." With the P&L — you see the problem in month 1, solve it in month 2, and the cash register recovers in month 3.

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"But I have an accountant" — that's not enough

An accountant works for taxes. They calculate your tax correctly, pay the social insurance, file the declaration. But an 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 has risen — you know the kitchen
• The accountant doesn't measure labor 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 food products

The accountant gives you numbers. You read those numbers and make decisions. These are separate jobs.

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P&L — Look at It Weekly, Not Monthly

The world standard: monthly P&L. But in Baku, especially for newly opened restaurants, my recommendation: a weekly mini P&L.

Not a full P&L — a simplified version:

This week:
├── Revenue:           18,500₼
├── Food purchases:     6,200₼  (33.5%)
├── Labor costs:        5,100₼  (27.6%)
├── Prime Cost:        11,300₼  (61.1%) ✅
└── Other fixed:        4,500₼
    ────────────────────
    Weekly result:      2,700₼  (14.6%) ✅

This is a 5-minute calculation. Sit down every Sunday and write these numbers. Write for 4 weeks — you'll see the trend. Problems will become visible weeks earlier, without waiting for the monthly P&L.

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P&L CHECKLIST — Start This Month

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