The 30 30 30 rule for restaurants also known as the 30-30-30-10 rule is a restaurant budgeting formula that was designed to divide the total revenue into core expense categories to guarantee the restaurants profitability.
The 30-30-30-10 rule or 30 30 30 rule for restaurants uses the following formula for budgeting.
30% Food Costs (COGS): Ingredients, raw materials and beverages.
30% Labor Costs: Wages, benefits, payroll taxes and training.
30% Overhead costs: Rent, insurance, utilities and marketing expenses.
And 10% refers to the profit or net operating profit.
The 30 30 30 rule or 30-30-30-10 rule for restaurants is an old school restaurant budgeting rule and formula, and while it still remains a popular baseline, many industry experts now consider the 30-30-30 model to be outdated and instead advise that you create custom budgets that are based on your own specific business concept, instead of just relying on averages.
Restaurants are profitable although they also operate on notably thin margins.
Typical net profits of restaurants range from between 3% to 5%.
And after accounting for COGS or cost of goods sold and labor, which also often consumes on average of around 60% to 70% of revenue, a restaurant that makes around $100,000.00 in monthly sales, often only takes home around $3,000.00 to $5,000.00 in net profit.
Full service restaurants often yield a 3% to 5% net margin as a result of higher labor costs and table service.
Fast Casual and Quick Service or QSR often tends to hit 6% to 9% because of optimized menus as well as higher daily volume and self service models.
Catering business often see and have around 7% to 8% margins and benefit from predictable headcount and bulk purchasing.
The razor thin margins of restaurants also means that even having slight fluctuations in cost of ingredients, employee wages or food waste can also impact a restaurant owner's bottom line significantly.