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Restaurant / F&B

Reported 22% EBITDA —
Real EBITDA Was −4%

Real EBITDA: −4% Profitable at 9% in 12 Weeks
Restaurant chain · 3 locations ₹1.2 Crore monthly revenue Bengaluru Timeline: 12 weeks

The founder had built a genuine brand. Three locations — two cloud kitchens and one dine-in — operational for 26 months, a loyal customer base, and a P&L that showed 22% EBITDA on ₹1.2 Crore monthly revenue. The business looked healthy by every number the team tracked. IUSP Partners found ₹31 lakh per month of costs that were either missing from the P&L or misrepresented in it.

Four Problems Hidden in One P&L

The engagement started with a straightforward brief: help the chain prepare financials for a second-location franchise pitch. Within two weeks, that brief had changed entirely. What IUSP Partners found was not a formatting problem — it was four structural accounting errors that together swung EBITDA by 26 percentage points.

Problem 1: Swiggy & Zomato Revenue at Menu Price

The P&L booked all delivery revenue at the full menu price that the customer paid. The Swiggy and Zomato commissions — 28-30% depending on the tier and restaurant pack — were being recorded as a separate "platform marketing expense" in overheads. This is an extremely common error in F&B accounting, and it produces a revenue number that does not represent actual cash received.

Impact: On ₹50L/month of platform revenue (Swiggy + Zomato combined), the chain was overstating net revenue by ₹14-15L per month. Real net revenue from delivery was ₹35-36L, not ₹50L.

"If you book Swiggy revenue at menu price, your food cost percentage looks artificially low and your EBITDA looks artificially high. The commission doesn't disappear — it just hides in the wrong line."

Problem 2: Food Wastage at 9.2%, Not the Estimated 4%

The chain had used a standard industry benchmark of 4% food wastage in its budgeting. IUSP Partners conducted a two-week physical reconciliation of stock-in vs stock-used vs stock-remaining across all three kitchens. Actual wastage: 9.2%.

On a food cost base of ₹38L/month, 9.2% vs 4% wastage = ₹1.97L/month unaccounted. Over a year, that is ₹23.6L simply disappearing between the delivery dock and the plate — partly staff meals, partly over-prep, partly poor stock rotation (FIFO not being followed in the cloud kitchens).

Problem 3: Zero Owner Salary Normalisation

The founder drew no formal salary from the business. This is extremely common in owner-managed F&B businesses — and it makes EBITDA look better than it actually is. For any investor, franchisee, or acquirer, a market-rate salary for the operator must be included in the cost structure.

Market rate for a ₹1.2 Crore/month F&B operation owner-operator in Bengaluru: ₹2.5L/month. Adding this normalised cost alone reduced reported EBITDA by 2.1 percentage points.

Problem 4: No Location-Level P&L

All three locations were consolidated into a single P&L. Rent, staff, and utilities were blended. When IUSP Partners separated them, the picture changed dramatically:

Location Revenue/Month EBITDA (Restated) Status
Cloud Kitchen A (Koramangala)₹42L+16%Profitable, scale candidate
Dine-In (Indiranagar)₹51L+11%Profitable, anchor location
Cloud Kitchen B (Whitefield)₹27L−9%Losing ₹2.4L/month — unknown until now

The Whitefield cloud kitchen had high rent (₹1.8L/month for a dark kitchen — above market), a delivery zone with heavy Swiggy competition reducing effective order volume, and staffing costs designed for a volume that had never materialised since launch 14 months earlier.

Warning Signs in Restaurant / F&B Accounting

The Fix: Net Revenue, Recipe Cards, and Weekly Location P&L

What IUSP Partners Implemented

Twelve Weeks to a Real Number

The first month after implementing net revenue recognition, reported revenue dropped from ₹1.2 Crore to ₹1.05 Crore. The owner found this psychologically difficult — the business had not shrunk, only the accounting had corrected. Within 30 days, the accuracy of the new numbers started generating better decisions.

Six dishes with food cost above 40% were repriced upward or removed from the menu. The Whitefield kitchen's turnaround began showing results in week eight: wastage down from 11% to 5.8%, corporate lunch orders up 34%.

Outcomes at 12 Weeks

The 22% EBITDA was never real — but 9% is. And a business that knows its real profitability can be managed, improved, and scaled. One that believes a false number is flying blind.

If your restaurant P&L shows strong EBITDA but cash is always tight, the real number is likely hiding in plain sight. Let's find it.

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