Utility Cost Ratio

Your utility cost ratio is like a health checkup for your restaurant’s operations. It tells you how efficiently you’re managing everyday essentials like electricity, water, gas, and waste services. While it might seem like a small line item, keeping this ratio in check can make a big difference in your profit margins.

What Is Utility Cost Ratio?

In simple terms, your utility cost ratio shows what percentage of your restaurant’s revenue goes toward utilities. These include:

To calculate it, divide your total monthly utility expenses by your total monthly revenue, then multiply by 100. For example, if your utilities cost ₹15,000 and your revenue is ₹3,00,000, your utility cost ratio is 5%.

What’s a Healthy Utility Cost Ratio for Restaurants?

Most restaurants aim for a utility cost ratio between 3–6% of revenue.

• Quick-service restaurants with less equipment may land closer to 3%.

• Full-service or fine-dine outlets may hover around 5–6%, depending on kitchen size, air conditioning, and lighting needs.

• If your ratio creeps above 6%, it’s time to look under the hood.

What Impacts Utility Costs in Restaurants?

• Electricity (biggest expense): Refrigeration, lighting, HVAC, and kitchen equipment

• Gas: Used in cooking and heating water

• Water: Affected by dishwashing, prep, and restroom use

• Waste & internet: Small but consistent contributors

Operational habits also matter. Leaving lights or equipment on, leaky faucets, and inefficient dishwashers all quietly drive up bills.

How to Reduce Your Utility Cost Ratio

• Switch to LED lighting and energy-efficient appliances

• Use programmable thermostats and insulate your space properly

• Train staff on best practices for shutting down equipment and conserving water

• Regularly maintain kitchen equipment to keep it running efficiently

• Track costs monthly to spot unusual spikes or trends

Final Tip

Expect utility costs to rise during extreme weather (thanks to heating or cooling). But if they spike unexpectedly, it could signal equipment issues, leaks, or operational oversights.

Your utility cost ratio isn’t just a number—it’s a window into how efficiently your restaurant is running behind the scenes. Stay on top of it, and your bottom line will thank you.