What Is the 30/30/30 Rule for Restaurants?

What is the 30/30/30 rule?

The 30/30/30 rule is a simple profitability framework for food businesses. It divides revenue into four buckets — three costs and one profit — and argues that if you can keep each cost category to around 30% of revenue, you'll run a viable business with a 10% net margin. At its most basic, the formula looks like this:

Each of the three cost categories represents a different type of expenditure. Food cost covers the direct materials that go into your products. Labour covers the people who make and sell them. Overhead covers everything else needed to keep the business running. Together they account for 90% of revenue, leaving a 10% net profit margin — thin, but workable for a food business.

The rule is most commonly associated with restaurant economics, but it's widely applied across food production, bakeries, catering businesses, and food retail. It's not a legal standard or an accounting rule — it's a rule of thumb, and its value is as a sense-check rather than a rigid target.

Breaking down the 30% food cost target

Food cost includes everything that goes directly into making a product: raw ingredients, packaging materials, and the cost of waste and spoilage. If you're a bakery, food cost covers flour, butter, eggs, sugar, and the boxes your cakes go into. If you're a caterer, it covers every ingredient that ends up on the plate — plus any that doesn't make it that far.

A food cost percentage of 30% means that for every £1.00 of revenue, £0.30 goes on the materials to produce what you sold. That leaves £0.70 to cover labour, overhead, and profit. Whether 30% is achievable depends heavily on your business model:

The 30% target is a benchmark, not a rule. Artisan bakeries often run at 25–35% because they can command premium pricing. Cafés tend to sit at 28–35% because coffee has a high margin that offsets food costs. Fine dining restaurants often achieve lower food cost percentages because their selling prices are high relative to ingredient costs.

If your food cost percentage is consistently above 40%, pricing is almost certainly too low relative to the cost of your ingredients. If it's below 20%, you may be pricing well — or you may be undervaluing the quality of ingredients your products deserve. Read more in our guide to food cost percentage for small food businesses.

Breaking down the 30% labour cost

Labour cost includes all wages paid to anyone who works in the business: bakers, kitchen assistants, front-of-house staff, delivery drivers. But it also includes the associated employment costs that are often overlooked by small business owners: employer National Insurance contributions (13.8% on earnings above the secondary threshold), holiday pay (5.6 weeks statutory entitlement), and pension contributions if you're auto-enrolling staff.

In small food businesses where the owner does most or all of the production themselves, labour cost is frequently under-counted or not counted at all. If you're baking every product yourself and not paying yourself a proper wage, your labour cost looks artificially low — but the cost is still there. It's just being absorbed by you personally in the form of unpaid hours.

The 30% target assumes you're paying yourself a fair market wage for your time. For a small bakery owner doing 40 hours a week of production, that might be £15–£20 per hour — which quickly adds up to a significant share of revenue. If your labour cost looks very low, it's worth asking whether you've genuinely factored in your own time.

Breaking down the 30% overhead

Overhead covers all the costs that aren't directly tied to a specific product: the fixed and semi-fixed costs of keeping the business operational. Common overhead items for small UK food businesses include:

• Rent and business rates (or a portion of your home costs if you're a home baker)
• Utilities: gas, electricity, water
• Equipment depreciation and maintenance
• Insurance (public liability, product liability, employers' liability)
• Packaging and consumables not counted in food cost
• Software subscriptions (accounting, recipe management, point of sale)
• Marketing: website, social media, photography, market fees
• Card payment processing fees (typically 1.5–2.5% of revenue)
• Vehicle and delivery costs
• Professional fees: accountant, food safety consultant

Overhead is the most variable component of the 30/30/30 model, because it depends enormously on your business setup. A market stall trader has near-zero rent overhead — their main fixed costs might be market pitch fees, a commercial kitchen rental, and insurance. A bricks-and-mortar café, by contrast, might spend 15–20% of revenue on rent alone, leaving little room within a 30% overhead budget for everything else.

This variability is one reason the rule is better understood as a range rather than a fixed target. If your overhead is 20%, you may be able to sustain a higher food cost or labour cost and still hit 10% profit. The key is the total — if all three costs exceed 90%, the business isn't profitable.

Does the 30/30/30 rule apply to small UK food businesses?

The honest answer is: partly. The rule was originally developed for sit-down restaurants, where the three-way split between food, labour and overhead is fairly consistent. Small UK food businesses often have significantly different cost structures.

A home baker, for example, might have near-zero overhead (no commercial premises, no business rates, minimal additional insurance) and do all production themselves. Their structure might look more like food 35%, labour 40%, overhead 5%, profit 20% — which is a perfectly healthy business, just not one that fits the 30/30/30 template.

Bakeries selling direct-to-consumer at farmers' markets often have lower labour costs per £ of revenue than restaurants, because a single person can produce and sell a large volume of goods. Their food cost might be slightly higher, but without the weight of full-time staff wages, overall margins can exceed 10%.

Where the 30/30/30 rule is most useful for small food businesses is as a profitability diagnostic. If your food cost is 45% and your labour cost is 35%, you're already at 80% before you've counted a single overhead item — and you're almost certainly losing money. The rule flags that something is structurally wrong, even if the correct solution isn't to hit exactly 30% in each category.

What is the 30/30/30 rule in practice — a worked example

Consider a small bakery with £5,000 in monthly revenue. Here's what the 30/30/30 model looks like when it's working:

Now consider what happens if ingredient costs creep up — perhaps due to butter and egg price increases — and food cost runs to 40% instead of 30%:

A 10-percentage-point increase in food cost has wiped out all profit. This is the core insight of the 30/30/30 rule: the margins in food businesses are thin, and cost increases in one area don't just reduce profit proportionally — they can eliminate it entirely. That extra £500/month in ingredient costs needs to come from somewhere, either by raising prices, reducing waste, or cutting other costs.

How to use the rule to improve your margins

The 30/30/30 rule identifies three levers you can pull to improve profitability. In practice, most small food businesses have the most to gain from the first one.

1. Reduce your food cost percentage

Food cost is the lever with the most immediate impact for most small food businesses. Start by calculating the food cost % for every product you sell — you may find that a handful of products are dragging the whole range down. Once you know which products are the culprits, you can address them through better recipe costing, more accurate portion sizing, reduced waste, or adjusted pricing.

Even small improvements compound quickly. Reducing food cost from 38% to 32% on £5,000/month of revenue frees up £300/month — the equivalent of a pricing increase across your whole range, without having to charge customers more.

2. Manage labour more efficiently

For businesses with employees, labour scheduling is often the biggest source of waste. Overstaffing during quiet periods, inefficient production planning, and poor batch scheduling all add labour cost without adding revenue. For sole traders, the equivalent is ensuring your production time is allocated to the highest-margin products — not just the ones you enjoy making most.

3. Audit and reduce overhead

Review your overhead line by line every six months. Software subscriptions accumulate — are you paying for tools you no longer use? Card payment fees vary significantly between providers. Insurance can often be renegotiated at renewal. Marketing spend should be tracked against revenue impact. Small savings across several overhead categories can meaningfully improve your profit margin without touching food cost or labour.

How FoodCore helps you hit your food cost targets

For most small food businesses, food cost is the variable they have the most control over in the short term — and the one most likely to drift upwards without being noticed. FoodCore tracks food cost percentage for every recipe automatically. When an ingredient price changes, every recipe that uses it updates instantly, so you always know your true cost per product.

FoodCore also shows you which products in your range are underperforming on margin — allowing you to make informed decisions about pricing, reformulation or discontinuation before the impact shows up in your bank account. Explore FoodCore's recipe costing tools or read our complete guide to recipe costing.