Controllable and Non-Controllable Expenses: Building the Full P&L

What a Complete P&L Tells You

A profit and loss statement (P&L), also called an income statement, is the single most important financial report a restaurant manager reads regularly. It answers one question: did the restaurant make or lose money during a specific period, and exactly where did the money go? Every line item on the P&L is either revenue coming in or an expense going out. The difference at the bottom is net operating income (if positive) or a net operating loss (if negative).

A well-built P&L moves top to bottom in a standard order. Learning that order—and understanding which expenses you can control and which you cannot—is the core skill this lesson builds.

The Standard P&L Structure

Restaurant P&Ls follow a consistent sequence:

1. Net Sales — Total revenue collected from food and beverage sales after any discounts or comps are removed. This is your baseline; every percentage on the statement is calculated against net sales.

2. Cost of Goods Sold (COGS) — The cost of the food and beverages you sold. Subtract COGS from net sales to get Gross Profit.

3. Labor Costs — Wages, salaries, payroll taxes, and benefits for all staff. Some operators separate management salaries from hourly wages. Subtracting labor from gross profit gives Gross Operating Profit.

4. Controllable Expenses — Operating costs management can adjust in the short run. Examples include supplies, marketing and advertising, utilities, repairs and maintenance, and credit card processing fees.

5. Non-Controllable Expenses — Costs that are fixed by contract or law and cannot be changed quickly. Examples include rent or occupancy costs, property insurance, and depreciation of equipment and leasehold improvements.

6. Net Operating Income (NOI) — What remains after all expenses are subtracted from net sales. This is the bottom line.

Controllable vs. Non-Controllable: The Management Distinction

This distinction matters because it tells you where your energy as a manager is most useful.

Controllable expenses respond to your decisions. If food-safety supply costs spike, you can shop alternate vendors. If utility costs rise, you can adjust HVAC schedules or switch to LED lighting. If marketing is not driving covers, you can shift the budget. You have leverage here, and you are accountable for these numbers every period.

Non-controllable expenses are determined by contracts, legal requirements, or accounting rules—not by daily operational choices. Your lease payment is the same whether you served 200 covers or 2,000. Insurance premiums are set by your policy. Depreciation is calculated by an accounting method applied to your fixed assets. You cannot reduce these costs in the short run, but you must account for them accurately so your P&L reflects true profitability.

A common managerial error is to focus only on food and labor costs and ignore the controllable expense section. Supplies, marketing, and repairs add up quickly and can eliminate profit that food and labor percentages suggest should exist.

Calculating Line-Item Percentages

Every expense line is expressed as a percentage of net sales using this formula:

Expense % = (Expense Amount ÷ Net Sales) × 100

If net sales are $85,000 and rent is $8,500, rent % = ($8,500 ÷ $85,000) × 100 = 10.0%.

In a spreadsheet, you never type a percentage by hand. You build a formula that references the actual dollar cells. That way, if a number changes, every percentage updates automatically. This is not just good practice—it is a required skill for this lesson's assessment.

Formatting the P&L Correctly

A correctly formatted P&L:

• Lists net sales at the top as both a dollar figure and 100% (because all percentages are relative to net sales).
• Groups expenses in the correct sequence: COGS, labor, controllable, non-controllable.
• Shows subtotals at each major break (gross profit, gross operating profit, NOI).
• Expresses every line as a dollar amount and a percentage of net sales, calculated by formula.
• Shows NOI as the final line, in dollars and as a percentage.

Accuracy and the Spot-Check Standard

In professional settings, a P&L that does not balance—or that places expenses in the wrong category—misleads ownership and can trigger poor decisions. For this lesson, your completed statement must match the answer key within ±$1.00 on the NOI line. Rounding differences of a few cents accumulate across many lines; this tolerance acknowledges that reality while holding you to a high standard.

During peer review, check not only whether numbers match but whether categories are correct. A depreciation charge placed in the controllable section, for example, would misrepresent management's performance even if every dollar figure were accurate.

Safety Note

Financial work in a restaurant office involves computers, printers, and shared network drives containing sensitive payroll data. Keep your workstation screen private when payroll figures are visible. Follow your employer's data-handling policies; payroll and financial records are confidential. If you are working in the restaurant itself during financial review, be aware of your surroundings—do not leave printed P&L documents unattended on a table in a public area.