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.
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.
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."
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).
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.
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.
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%.
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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