The 30/30/30/10 rule is a restaurant industry rule of thumb for revenue allocation: 30% to food cost (cost of goods sold), 30% to labor (wages plus benefits), 30% to overhead (rent, utilities, insurance, marketing, equipment, debt service, etc.), and 10% to profit. It's a target distribution that healthy restaurants land near most months.
It's a benchmark, not a recipe. Real restaurants drift from these percentages depending on concept (fine dining vs. quick-service vs. bar-driven), location (urban high-rent vs. suburban), and seasonality. The rule's value is as a diagnostic — when one category creeps up, the others (usually profit) get squeezed first.
The Four Categories
Food cost (COGS) — 30%
Includes raw ingredients, packaging, condiments, beverage costs (if not separated). On a $100K monthly revenue restaurant, food cost target is $30K.
Concept-specific norms:
- Fine dining: 32-38% (premium ingredients, larger portions)
- Quick-service: 25-30% (lower-cost menus, higher volume)
- Pizza/bar food: 25-32%
- Steakhouse: 35-40% (premium proteins drive cost up)
Labor — 30%
All wages, payroll taxes, workers' comp, benefits if any. Typically split into front-of-house (servers, bartenders, hosts) and back-of-house (cooks, dishwashers, prep, manager).
Concept-specific norms:
- Quick-service: 25-30% (less FOH labor)
- Casual dining: 28-32%
- Fine dining: 32-38% (more skilled labor, more FOH)
- Bar-heavy concepts: 22-28% (high beverage margin offsets labor)
Combined food + labor = "prime cost." Industry benchmark: prime cost should stay under 60% of revenue. Above 65% and the restaurant is structurally unprofitable; above 70% and it's losing money on every transaction.
Overhead — 30%
Everything else operational: rent, utilities, insurance, equipment leases, repairs and maintenance, marketing, accounting, professional fees, debt service. The biggest single line is usually rent.
Rent norms:
- Healthy ratio: rent ≤ 8-10% of revenue
- Manhattan / urban premium location: rent often 12-18% — eats into profit
- Suburban / strip-mall: rent often 5-8% — leaves room for profit
Profit — 10%
What's left after the first three categories. On $100K revenue, 10% target = $10K monthly net profit.
Reality check: this is a target, not a guarantee. Average independent restaurant net margin in 2026 runs 3-9% depending on concept and market. 10% is the upper end of healthy.
When One Category Goes Off
In a healthy restaurant, the four categories balance. When one drifts up, profit gets squeezed first. Common patterns:
- Food cost creep (32-38%): usually portion size, supplier price increases, or theft/waste. Recipe costing + monthly inventory cycle catches it.
- Labor creep (32-40%): usually overstaffing during slow shifts, schedule mismatch with traffic, or new wage minimums. Schedule analysis vs. forecast catches it.
- Overhead creep (32-40%): rent escalation, utility surge, equipment failure forcing emergency repairs. The restaurant has less control over overhead in the short run.
- Profit collapse (3% or below): at least one of the above has been creeping for weeks. Don't fund the gap with capital — fix the operational issue first.
Where Working Capital Fits
When a restaurant needs an MCA or short-term working capital, the underlying need usually falls into one of three categories:
- Equipment failure during peak season — walk-in cooler, oven, dishwasher. Repair cost + lost-revenue prevention. Restaurant funding covers this.
- Pre-season inventory + staff hire — for seasonal concepts, capital deploys before revenue lands. The 30/30/30/10 ratios temporarily distort during ramp.
- Bridge through slow months — for highly seasonal concepts, off-season revenue can't cover overhead. Capital bridges the gap if peak-season profit is enough to repay.
In all three cases, the question to ask before taking the capital: does the math work when you re-run the 30/30/30/10 with the new debt service included? If overhead creeps to 35% because of the daily ACH and prime cost is already at 60%, profit goes to 5% — barely sustainable. If prime cost is 55% and overhead with debt stays at 30%, profit holds at 15% — clean deal.
Apply
If you're a restaurant operator running 30/30/30/10 math and considering capital, apply with Westline. We underwrite restaurant cash flow specifically and structure daily ACH to fit inside the overhead category without squeezing profit below sustainable.
855-439-0082. Related: Restaurant funding overview · Restaurant funding guide · Florida restaurant funding
Sources & References
- Bank denial and small business credit access figures cited in this piece are derived from the Federal Reserve Small Business Credit Survey. Approval rates for small business credit applications at large banks have ranged from approximately 13%-31% across recent survey years, depending on bank category and reporting period.
- Small business finance landscape and lending program data: SBA Office of Advocacy.
- Merchant cash advance industry standards and disclosure practices: Small Business Finance Association (SBFA).
- Commercial financing disclosure regulations referenced (NY FAIR Act, CA SB 1235/666/362, VA, UT) are summarized from the published statutes; consult counsel for specific compliance application.