Why Restaurants Owners Should Care
For restaurants, overhead is every expense that isn't food cost or front-of-house/kitchen labor. It's rent, insurance, admin staff, non-food supplies, and everything else that keeps the doors open whether you serve 200 covers or 20. Restaurants operate on thin margins (typically 3-9% net), so overhead that creeps even 2-3 percentage points can turn a profitable restaurant into a money-losing one.
Industry Benchmarks
20-30% of revenue
Healthy Range
31-35% of revenue
Warning Zone
Over 35% of revenue
Danger Zone
Industry context: Fast-casual: 18-25% overhead. Full-service: 25-35%. Fine dining: 30-40%. Higher service levels require more overhead (linens, decor, front desk, sommelier).
Source: Restaurant industry financial benchmarks, 2025
How to Calculate Overhead Costs
Formula
Overhead Rate = (Total Overhead Costs / Total Revenue) × 100
In plain English
What percentage of every dollar you earn goes to keeping the business running (not counting direct service delivery costs)
Example: Rosario's Trattoria
Annual Revenue Full-year revenue | $1,200,000 |
Rent & Occupancy $8K/month lease + CAM charges | -$96,000 |
Utilities Gas, electric, water, HVAC | -$48,000 |
Insurance & Licensing Liability, liquor license, health permits | -$36,000 |
Administrative Bookkeeping, payroll processing, POS fees | -$30,000 |
Marketing Social media, local ads, delivery platform commissions | -$36,000 |
Maintenance & Repairs Equipment repair, pest control, smallwares | -$30,000 |
Technology POS software, reservation system, inventory mgmt | -$18,000 |
Miscellaneous Linen service, music licensing, uniforms | -$14,000 |
Calculation
($308,000 overhead / $1,200,000 revenue) × 100 = 25.7% overhead rate
This restaurant spends about 26 cents of every dollar on overhead. If gross margin (after food and labor) is 35% ($420K), then $308K goes to overhead, leaving $112K in net profit (9.3%). Lose a few points of overhead control and margin drops to 6-7%, the difference between paying yourself well and barely breaking even.
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Get My Free ScoreCommon Problems in Restaurants
Symptom
25% of revenue through third-party apps at 15-30% commission
Impact
If 25% of revenue comes through delivery at 25% commission, that's 6.25% of total revenue gone before food cost. Most owners treat this as cost of goods, but it functions as overhead.
How to Improve Your Overhead Costs
How to do it
Calculate true cost per delivery order (commission + packaging + reduced tip income). If net margin on delivery orders is below 5%, consider direct ordering alternatives or menu price adjustments for delivery.
Expected impact
Recovering 2-4% margin on delivery orders. On $300K in delivery revenue, that's $6K-12K/year.
Key Takeaways
What it measures
The ongoing expenses of running your business that aren't tied to delivering a specific product or service
Healthy range for Restaurants
20-30% of revenue
Formula in plain English
What percentage of every dollar you earn goes to keeping the business running (not counting direct service delivery costs)
Most common problem
Delivery platform fees eating margins
Fastest fix
Audit delivery platform economics
Related Financial Metrics
Other important metrics for Restaurants
Overhead Costs in Other Industries
See how overhead costs compares across different business types
Cleaning Companies
Cleaning company overhead runs 10-18% solo, 20-28% for small teams, and 25-35% for larger operations. See benchmarks by company size.
Salons & Spas
Salon overhead averages 25-38% of revenue. Booth rental runs 20-30%, employee model 30-45%, high-end hits 35-50%. See benchmarks by salon type.
HVAC Contractors
HVAC overhead averages 25-35% for residential and 30-40% for commercial. Larger fleets trend higher. See the benchmarks and where to cut.
Marketing Agencies
Marketing agency overhead averages 20-30% of revenue. Remote-first runs 15-25%, downtown offices hit 30-45%. See where your agency should land.