Quick answer
The 30/30/30 rule is a compass for reading a restaurant's cost structure: roughly 30% of net revenue goes to food, 30% to labor and 30% to overhead, leaving about 10% net profit. It's not an accounting law but a fast benchmark that tells you at a glance whether your cost structure is healthy or out of balance.
What the 30/30/30 rule is and why it helps
Anyone running a restaurant quickly drowns in dozens of cost lines with no map to navigate them. The 30/30/30 rule exists to give you an instant sense of scale. It divides net revenue into three big blocks:
- 30% food (food and beverage)
- 30% labor (fully loaded cost)
- 30% overhead (rent, utilities, marketing, depreciation, repairs, accounting, insurance)
Whatever is left — about 10% — is the net profit you should be targeting. It's a deliberately simplified model: it's there for quick diagnostics, not to replace your profit and loss statement. When you look at month-end numbers and one slice is bloated, you immediately know where to act.
The power of the rule is its speed. An operator who keeps it in mind can read a P&L in thirty seconds and tell whether the business is sailing smoothly or taking on water.
The formula and how to apply it
The rule translates into three simple cost ratios, all calculated against the same denominator:
Cost ratio % = Cost line / Net revenue × 100
The denominator must always be net revenue, excluding sales tax. This is the most common and most dangerous mistake: using gross revenue artificially lowers every ratio and convinces you that you have margins you don't actually have.
For labor, what counts is the fully loaded cost, not take-home pay. You must include gross wages, payroll taxes, benefits and any statutory bonuses. This real cost is often 25-40% higher than the net amount an employee actually receives.
A complete worked example
Take a restaurant with $50,000 in monthly net revenue and these costs:
| Line | Amount | Ratio | |---|---|---| | Net revenue | $50,000 | 100% | | Food | $15,000 | 30% | | Labor (fully loaded) | $16,000 | 32% | | Overhead | $14,000 | 28% | | Net profit | $5,000 | 10% |
Here the three blocks sum to 90% and net profit lands exactly at 10%. Labor runs slightly above target (32%), but it's offset by below-average overhead (28%). That's a healthy balance.
Now imagine food cost rises to 35% because a supplier increase wasn't passed on to prices: the total reaches 95% and profit halves to 5%. That's the diagnostic power of the rule — it tells you instantly where to look. To check your own numbers, start with the food cost calculator, which gives you the exact food cost ratio.
The three slices in detail
Food (30%). This is the most attackable line in the short term. You control it with recipe cards, standard portioning, waste reduction and menu engineering. A well-managed food cost sits between 28% and 33% in full-service dining.
Labor (30%). This is the most rigid line but also where the biggest waste hides: overstaffing during dead hours, runaway overtime, shifts built on habit rather than on real traffic data. Measure it with revenue per labor hour.
Overhead (30%). Everything else lives here: rent, utilities, marketing, depreciation, repairs, professional fees, insurance. It's the most "fixed" slice and the hardest to attack month to month. Rent alone shouldn't exceed 8-10% of revenue: above that threshold it eats into the margin of everything else.
The limits of the rule (and why you must calibrate it)
The 30/30/30 rule is an excellent starting point, but treating it as dogma is a mistake. Ideal percentages change radically depending on the format of the venue.
| Format | Food | Labor | Overhead | Target profit | |---|---|---|---|---| | Full-service restaurant | 30% | 30% | 30% | 10% | | Pizzeria | 25% | 28% | 32% | 15% | | Bar / café | 22% | 30% | 33% | 15% | | Fast casual / takeaway | 32% | 22% | 31% | 15% | | Fine dining | 33% | 35% | 25% | 7% |
A pizzeria has lower food cost because dough is cheap, so it can afford higher profit. Fine dining carries both premium ingredients and a large staff: the margin compresses and has to be offset with high average checks. The underlying logic stays the same: the sum of costs must leave room for a decent profit.
Using the rule to set prices
The rule also works in reverse, to build selling prices. If your food target is 30%, the minimum net price of a dish is the food cost divided by 0.30:
Net price = Dish food cost / 0.30
Example: a dish with $4.50 of ingredients should sell for at least $15 net (4.50 / 0.30), to which you add sales tax for the menu price. This method avoids pricing "by feel" or copying competitors, which is the fastest way to end up with broken margins.
Before applying the rule to the whole venue, though, you need to know your break-even point. Use the break-even calculator to learn how much you must turn over just to cover fixed costs: below that threshold, no percentage will save you.
Common mistakes
- Calculating on gross revenue. It inflates the denominator and hides problems. Always use net of sales tax.
- Treating the three 30%s as rigid obligations. They're averages. What counts is the sum: if the three blocks stay within 90%, the profit is there.
- Underestimating labor cost. Take-home pay is not the fully loaded cost. Add payroll taxes, benefits and statutory bonuses.
- Forgetting depreciation. Kitchens, furniture and equipment wear out: spread them across overhead, or your profit is only on paper.
- Applying the same percentages to different formats. You don't run a bar with fine-dining numbers. Calibrate thresholds to your segment.
- Using the rule instead of a P&L. It's a compass for quick diagnostics, not a substitute for analytical accounting.
Related resources
To apply the 30/30/30 rule to your real numbers:
- Restaurant break-even calculator — find out how much you must turn over to cover all fixed costs and start making money.
- Food cost calculator — calculate the exact food cost ratio and check whether you're hitting the first 30%.
Start with break-even to set the bar, then use the 30/30/30 rule to read at a glance whether your cost structure is healthy. It's the fastest way to understand, every month, where your revenue is going.