Restaurant Budget: How to Build and Use One
Build a restaurant budget from sales forecasts down to costs, set targets for food, labour and prime cost, and review results weekly and monthly.
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Key takeaways
- A budget starts with a sales forecast by month, then sets cost targets as percentages of sales.
- Use last year if you have it, and the concept plan if you do not; round numbers and honest assumptions beat false precision.
- Compare actual results with the budget weekly for food, labour and prime cost, and monthly for the full profit and loss.
- A budget is a tool for decisions: when the gap appears, find the cause and act, then update the forecast.
In short: a restaurant budget is a plan for the next 12 months: sales by month, the cost of food, labour and other costs as targets, and the profit that is left. You then compare real results with it every week and month and act on the differences.
About 8 minutes to read. General information. All numbers are made up for illustration; use your own.
Owners who track the bank balance only learn about problems when the money has gone. A budget shows the problem weeks earlier, while there is still something you can do.
Start with sales
Everything flows from sales, so be careful and honest. If you trade already, start with last year's sales by month and adjust for changes: price rises, new hours, new channels, a new menu, road works. If you are new, estimate:
- Covers per day by day of the week.
- Average spend per cover, split by food and drink.
- Takeaway and delivery orders, with their average value.
- Opening days and hours.
Build three cases: cautious, expected and strong. Plan costs on the expected case and survive on the cautious one. See break even and cash flow.
Spread by month and season
Spread annual sales across 12 months using your seasonality: summer terraces, the December rush, the January slump, school holidays, Ramadan or other local events and festivals, large nearby events. If you have no history, use a guess and revise it after three months.
Set cost targets
Express costs as a share of sales so that they scale with the plan.
| Line | How to set it |
|---|---|
| Food and drink cost | From your recipes and prices. See food cost percentage and recipe costing. |
| Labour | From the rota and a forecast of hours. See labour cost and rota. |
| Prime cost | Food and labour together. See gross profit and prime cost. |
| Packaging and delivery | From your channel mix. See takeaway and delivery profit. |
| Card and platform fees | From your payment and delivery contracts. See card payment fees. |
Published rules of thumb vary by source and by type of restaurant, so treat them as a starting point and replace them with your own results as soon as you have a few months of data.
Add the fixed lines
Add rent and service charge, rates, insurance, utilities, software, accountant fees, repairs and maintenance, marketing, loan payments and a small contingency. See insurance and startup costs for the one off items. Keep the line names consistent with your accounting, so the budget and the accounts can be compared. See accounting basics.
Check the profit
Sales, minus variable costs, minus fixed costs gives the operating profit for the month. Add owner pay if it is not in the labour line, and tax and loan repayments to see the cash left. If the plan shows a loss at the expected level, fix the plan before you start: raise prices, cut costs or change the model.
Budget the cash as well as the profit
Profit is not cash. VAT or sales tax, supplier payment terms, stock purchases, equipment and loan repayments all move cash on different dates. See cash flow for a 13 week view.
Review every week and every month
A budget only works when you compare it with reality.
Every week look at: sales against the weekly target, food cost, labour cost, prime cost, waste and the main exceptions. See weekly numbers.
Every month look at: the full profit and loss against the budget, fixed costs, cash and the forecast for the next three months.
For each difference ask why. Was it volume, price, mix, waste, portion size, rota or an invoice? Write down the cause and the action.
Use your systems to keep it current
DineHarbor's reports provide sales comparisons, top products and busy hours, and its inventory tools keep stock and waste records. The Manager copilot can answer supported questions about your own data. They help you compare actual with budget faster; the targets and the decisions remain yours.
Update the forecast
When reality moves, move the forecast: new rent, a price rise, a long road closure, a better summer. Keep the original budget, so you can see what you planned and what you learned.
Common mistakes
- A sales target that is simply the owner's hope.
- Copying another restaurant's percentages.
- No budget for repairs and replacement of equipment.
- Ignoring seasonality.
- Treating the budget as a one off document.
- Not budgeting for owner pay.
A simple routine
- Build the 12 month plan with three sales cases.
- Set cost targets from your recipes, rota and contracts.
- Check the profit and the cash.
- Review weekly and monthly.
- Write the cause and action for each large variance.
- Revise the forecast each month.
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Questions and answers
How do I forecast sales for a new restaurant?
Estimate covers per day and average spend from your concept, the site count and comparable places, then build a cautious, expected and strong case. Update it with real sales as soon as you trade.
What percentages should I budget for food and labour?
Set targets from your own concept and costs rather than copying a number. Published ranges differ by source and type of restaurant. Our prime cost guide shows how to work out yours.
How often should I compare actual with budget?
Weekly for sales, food cost and labour, and monthly for the whole profit and loss, including rent, utilities and other fixed costs.
Should I budget for seasons?
Yes. Most restaurants have busy and quiet months. A flat monthly budget will mislead you, so spread sales by season and events.
What is the difference between a budget and a forecast?
A budget is the plan and the targets you set. A forecast is your latest view of what will happen. Many owners update the forecast monthly and keep the original budget as the reference.
See it in DineHarbor
About the author
Editorial team
The DineHarbor team writes this blog for restaurant owners and managers. Every article is checked against the product before it is published, so what we describe is what the software does.
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