If you’re running a restaurant and trying to figure out where all the money goes, you’re not alone.
Whether you’ve been open for ten years or you’re just getting started, building a budget can feel overwhelming.
But having one can be the difference between always putting out fires and actually building a business that works for you.
This guide walks you through a restaurant budget breakdown that’s simple and practical, using the structure we use every day with our clients at Vast.
(No accounting degree required.)
Why Your Budget Isn’t Just a Boring Spreadsheet
Before we get into the numbers, it’s worth stepping back for a second.
A budget isn’t a restriction—it’s a roadmap. It gives you visibility. It helps you know when to hire that extra person, when to tighten up expenses, and how to plan for the slow season without panic. It’s how you go from reactive to proactive.
And if you’re not a numbers person, don’t worry. This process is designed to be simple and approachable, even if you’ve never made a budget before.
Step 1: Estimate Your Gross Revenue
Start with the big number: total revenue before any discounts or comps. This includes every dollar that comes in from dine-in, takeout, catering, online orders, private events—everything.
If you’ve been open for at least a year, the best place to start is by looking at your actual revenue from last year. Pull your 2024 totals and use that as your foundation.
Then ask yourself: What’s changing this year?
- Are you raising menu prices?
- Launching a new revenue stream like catering or brunch?
- Adding a patio, expanding hours, or switching up delivery platforms?
Depending on your answers, you can make a reasonable growth projection. Here’s what we typically see restaurant owners use when forecasting:
Modest growth (3–5%)
If you’re keeping things steady but raising prices slightly or expecting inflation to push average check sizes up, a 3–5% increase over last year is a conservative, realistic place to start.
Moderate growth (5–10%)
If you’re planning operational improvements—like increasing table turns, adding new service hours, or leaning into marketing—a 5–10% growth estimate may be reasonable.
Aggressive growth (10–20% or more)
Launching new locations? Adding an event space or a catering business? Expanding delivery or reaching new audiences? That could justify a more aggressive projection—but only if it’s grounded in a real, executable plan. It’s important not to plug in ambitious growth just because you “hope” it happens.
On the flip side, if you’re planning for a slower year—maybe due to fewer hours, construction, or reduced staffing—it’s perfectly reasonable to forecast flat or even slightly lower revenue than last year.
Tip: Your budget should reflect your real expectations, not just your best-case scenario.
Step 2: Subtract Discounts, Refunds, and Comps
Not every dollar that comes in stays. Some meals get comped. Some customers get refunds. Discounts are a normal part of running a restaurant.
We typically recommend budgeting around 2.5 percent of gross revenue for these adjustments. Once you subtract this, you’ll have your net sales—the number that will serve as the foundation for the rest of your budget.
Step 3: Know Your Prime Costs – Food and Labor
Prime costs are the biggest expenses in almost every restaurant. These are the costs you have the most control over, and the ones that can make or break your bottom line.
Cost of Goods Sold (COGS):
This includes everything you need to serve your menu—ingredients, paper goods, packaging, bar inventory, and more. We recommend keeping your COGS around 30 percent of net sales. If you’re consistently over, it might be time to adjust portions, renegotiate with vendors, or raise prices.
Labor Costs:
This includes both hourly and salaried employees, payroll taxes, and benefits. For most restaurants, labor should stay around 35 percent of net sales. If your sales fluctuate month to month, labor costs will too—so it’s important to look at averages across time.
Together, COGS and Labor make up your Prime Costs. Your goal should be to keep Prime Costs under 65 percent of net sales. If they creep above that, your profit starts to vanish quickly.
Step 4: Budget for Overhead Costs
Overhead includes everything else it takes to run your restaurant—expenses that aren’t directly tied to the food you serve or the people you employ.
Here’s how we recommend allocating those costs, based on percentages of net sales:
Marketing – 4%
Covers advertising, email marketing platforms, events, and social media promotion.
Repairs & Maintenance – 3%
Everything from fixing the walk-in fridge to servicing kitchen equipment.
Occupancy (Rent Only) – 5%
This includes base rent. It doesn’t include things like property taxes or maintenance fees.
Utilities – 3.5%
Electricity, gas, water, internet, phone—anything you need to keep the lights on and the kitchen running.
General & Administrative (G&A) – 3%
Includes software, office supplies, insurance, accounting tools, and any other general business expenses.
Altogether, overhead costs typically add up to about 22.5 percent of net sales. If you’re in a high-rent market, or if you have an especially lean team, you may need to adjust these percentages slightly. But this is a solid benchmark for most restaurants.
Step 5: Don’t Forget Profit—and an Emergency Fund
Once you’ve allocated money toward prime costs and overhead, you should have about 12.5 percent of your net sales left.
This is your margin. And how you use it matters.
Part of it can go toward profit—money you can reinvest in the business or use to pay yourself. But part of it should go toward something most owners overlook: an emergency fund.
An emergency fund is exactly what it sounds like. It’s a cushion for unexpected events. A slow month. A broken piece of equipment. A snowstorm that keeps people away. We recommend building toward one to two months’ worth of expenses in a separate savings account.
You can start small—just a few percent each month—and build it over time.
A business that has cash on hand doesn’t just survive—it has options. And that’s the difference between reacting and planning.
Example Restaurant Budget Breakdown
If you’re more of a visual person, here’s what a basic budget breakdown might look like:
- Cost of Goods Sold: 30%
- Labor: 35%
- Overhead: 22.5%
- Profit / Emergency Fund: 12.5%
These numbers don’t have to be exact, but they give you a framework. And once you’ve got that, you can start making real decisions.
Want to play around with the numbers? Try our profitability calculator here.
You Don’t Need to Be Perfect – You Just Need to Start
Your first budget doesn’t need to be precise. It’s a tool to help you get clarity, and you can refine it month by month. What matters most is putting something on paper and using it to guide your decisions.
If you feel overwhelmed, that’s completely normal. You’re doing a hundred things at once, and budget planning often falls to the bottom of the list. But getting a grip on your numbers is one of the best ways to protect your restaurant and reduce stress.
And if you’d rather not do it alone, we’re here to help.
Want to Build This Together?
At Vast, we work with restaurant owners every day to create simple, usable budgets that match the reality of the business.
Whether you’re creating one from scratch or trying to make sense of the numbers you already have, we’d be happy to walk through it with you. It’s what we do!
Simply head over to our Contact page to book an introductory call. We’re always here to help.
Until next time.
