Restaurant Financial Formulas & Definitions

1. Total Revenue

The complete income generated from all restaurant operations before expenses are deducted. This is the starting point for all profitability calculations.

Total Revenue = (Average Check × Number of Covers) + Ancillary Income
Example: (£25.80 avg check × 150 covers) + £420 (private event) = £4,290 daily revenue

2. Revenue per Available Seat Hour (RevPASH)

Measures how effectively a restaurant generates revenue from its seating capacity over time. Key metric for evaluating operational efficiency.

RevPASH = Total Revenue ÷ (Total Seats × Operating Hours)

3. Menu Item Contribution Margin

Shows how much each menu item contributes to overall profit after accounting for its specific food cost. Essential for menu engineering.

Contribution Margin = (Item Price - Item Food Cost) × Quantity Sold
Example: (£22 salmon dish - £7.15 food cost) × 85 sold = £1,262.25 contribution

4. Break-Even Point

The minimum sales volume required to cover all fixed and variable costs. Below this point, the restaurant operates at a loss.

Break-Even Covers = Fixed Costs ÷ (Average Check - Variable Cost per Cover)

5. Prime Cost Ratio

The combined percentage of revenue consumed by food costs and labor expenses. The most important metric for restaurant financial health.

Prime Cost % = (Cost of Goods Sold + Labor Costs) ÷ Total Revenue × 100