The Complete Guide to Operating Expenses for Restaurants in New Zealand

Categories of Operating Expenses

Below is a breakdown of the key types of operating expenses typically incurred by restaurants in New Zealand:

 

1. Selling, General, and Administrative Expenses

SG&A covers a broad range of non-production-related costs essential to running your restaurant. These may include:

• Rent and Lease Payments: For premises such as your dining area or office space.

• Utilities: Electricity, water, gas, and internet services.

• Marketing and Advertising: Costs related to promoting your restaurant, such as social media campaigns, flyers, or promotions.

• Administrative Salaries: Wages for front-of-house staff, managers, and administrative personnel not involved in food preparation.

These expenses are ongoing and typically scale with your business operations.

 

2. Depreciation and Amortisation

These are non-cash accounting expenses that reflect the gradual loss in value of your assets:

• Depreciation refers to the reduction in value of tangible assets like kitchen equipment, furniture, and POS systems over time.

• Amortisation applies to intangible assets such as franchise fees, software licenses, or intellectual property.

Though these costs don’t involve actual cash outflow, they are essential for understanding the real value and lifecycle of your business assets.

 

3. Overhead Costs

Overhead refers to fixed or semi-fixed costs that are not directly tied to food production but are necessary to keep your business running. Common examples include:

• Insurance Premiums: Coverage for property, public liability, and employee protection.

• Utilities: Electricity, gas, water—often recurring regardless of revenue fluctuations.

• Licensing and Compliance Fees: Health and safety certifications, liquor licenses, and council permits.

While overhead expenses are largely unavoidable, managing them efficiently can enhance your operational resilience, especially during slow seasons.

 

Operating vs Non-Operating Expenses

• Operating expenses are the recurring costs directly associated with your restaurant’s day-to-day operations. These include items like rent, staff wages, utilities, and inventory costs.

• Non-operating expenses, on the other hand, arise from activities that fall outside your core business operations. Common examples include:

  • Interest on loans

  • Losses from the sale of assets

  • Foreign exchange losses

Clearly separating these two categories allows for a more accurate evaluation of your restaurant's operational performance.

How Operating Expenses Appear on a Profit and Loss Statement

On your Profit and Loss (P&L) statement, financial performance is typically structured as follows:

1. Gross Profit: Calculated by subtracting cost of goods sold (COGS) from total revenue.

2. Operating Expenses: Deducted from gross profit. This includes SG&A, depreciation, and overhead costs.

3. Operating Income (EBIT): The result after subtracting operating expenses from gross profit.

4. Non-Operating Expenses: Further subtracted from operating income to determine final profitability.

5. Net Profit: The true bottom line after accounting for all business-related and external costs.

Net Profit Margin

Your net profit margin is a key profitability metric, calculated as:

Net Profit ÷ Total Revenue

This percentage indicates how much actual profit your restaurant retains from every dollar of revenue—after all expenses have been accounted for.

 

Tax Implications in New Zealand

In New Zealand, the Inland Revenue Department (IRD) allows most operating expenses—such as rent, utilities, staff wages, and marketing costs—to be tax-deductible, provided they are incurred in the course of generating business income.

To ensure tax compliance and maximise allowable deductions, restaurant owners should:

• Maintain accurate and up-to-date financial records

• Retain all receipts, invoices, and payroll documentation

• Seek advice from a certified accountant familiar with the hospitality sector

Proper documentation not only supports your claims in the event of an audit but also enables better forecasting and financial decision-making.

 

Strategies to Reduce Operating Expenses

Managing costs effectively is crucial in the competitive restaurant landscape. Below are some actionable strategies to help reduce operating expenses without compromising quality or service:

 

1. Implement Hybrid Work Models

If your restaurant employs back-office staff (e.g., HR, finance, marketing), consider offering a hybrid work arrangement. Reducing on-site workdays can lower:

• Office rental expenses

• Utility bills

• General overhead associated with workplace occupancy

 

2. Leverage Automation and Cloud-Based Tools

Use cloud-based software for:

• Inventory management

• Employee scheduling

• POS and financial reporting

These tools streamline workflows, reduce human error, and help you optimise labour costs, especially during peak and off-peak hours.

 

3. Negotiate with Suppliers

Build long-term relationships with your food and beverage suppliers, and negotiate:

• Bulk purchase discounts

• Flexible payment terms

• Exclusive deals or loyalty pricing

Regularly reviewing supplier contracts can reveal opportunities for cost savings and efficiency improvements.

 

4. Outsource Non-Core Functions

For specialised but non-essential tasks like:

• Accounting and payroll

• IT support

• Legal compliance

Consider outsourcing to experienced third-party providers. This allows you to access professional expertise without the overhead of full-time salaries and benefits.

 

Leveraging POS Software to Control Costs

Modern restaurant POS systems, such as Eats365, offer valuable tools for managing operating expenses. They allow real-time tracking, categorisation by department or menu item, and the generation of detailed financial reports. With centralised data access across multiple locations, you can identify inefficiencies, forecast expenses, and make informed purchasing decisions.Contact Eats365 to learn how their POS solutions can streamline your operations and reduce unnecessary costs.

 

FAQs

1. What restaurant operating expenses are tax-deductible in New Zealand?

Most operating expenses related to the day-to-day running of your restaurant are tax-deductible under Inland Revenue Department (IRD) guidelines. This includes rent, staff wages, utilities, marketing expenses, and certain overhead costs. To ensure deductions are valid, business owners must keep detailed and accurate records, including receipts, invoices, and payroll documentation.

 

2. How can I tell the difference between operating and non-operating expenses on my P&L statement?

Operating expenses are recurring costs directly tied to running your restaurant—such as wages, utilities, and rent—and are subtracted from gross profit to calculate operating income. Non-operating expenses, such as interest payments or asset sale losses, are not related to daily operations and are deducted after calculating operating income to determine net profit.

 

3. What are the most effective ways to reduce restaurant operating expenses without sacrificing service?

Key strategies include:

• Using cloud-based tools to automate scheduling and inventory

• Negotiating better rates with suppliers

• Outsourcing non-core tasks like accounting and IT

• Offering hybrid work models for administrative staff to reduce office costs These methods help control costs while maintaining or even improving operational efficiency and customer service.