Dr. Paul Borosky, DBA, MBA
Business Plan Writer · Business Consultant
How Much Should a Restaurant Owner Pay Themselves? A Wage First. Profit Second.
Most chef-owners pay themselves whatever the bank balance seems to allow. The result is a family budget that swings every month and a tax bill nobody saw coming.
Written by Dr. Paul Borosky, DBA, MBA
The Definition
What Is Owner Pay in a Restaurant?
Owner pay is the compensation a restaurant owner takes from the business. Depending on the legal structure, it may be owner draws, as with a sole proprietorship or single-member LLC, or a reasonable salary through payroll plus distributions of remaining profit, as with an S corporation. A fair owner wage is roughly what it would cost to hire someone else to do the owner’s job.
“Pay yourself like an employee first: a set amount, on a set day, for the work you do. Whatever the restaurant earns after that is profit. If nothing is left after a fair wage, you do not own a profitable restaurant yet. You own a job.”
Need the answer fast? Read the gold Short Answer boxes and the numbered steps. Want the full picture? Follow Fast Frankie the fox, owner of Fast Frankie’s Fire-Baked Pizza, from Dr. Paul’s Fabled Forest, as a great week turns into a family budget nobody can plan around. The story shows up in a few short gold notes along the way. The math sits in one section, clearly marked.
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Meet Frankie: Whatever Is Left
Some lessons stick better as a story. Dr. Paul’s Fabled Forest is his business school told through a forest full of small business owners. Doctor Owl, a dry-witted consultant who lives in the Lone Oak, helps them fix the same problems real owners face. Today he finds Fast Frankie the fox closing up Fast Frankie’s Fire-Baked Pizza late on a Sunday, counting the drawer with one paw and texting home with the other.
FRANKIE: (scooping coins into a bag) Great week! Taking a big one home tonight.
DOCTOR OWL: How much did you take home last week?
FRANKIE: Last week? Barely anything. It was slow. We ate soup at home.
DOCTOR OWL: And the week before?
FRANKIE: (grinning) Big one. Bought a new couch.
DOCTOR OWL: So your family eats soup or buys couches depending on the weather.
Frankie stops counting.
FRANKIE: When you put it that way, it sounds bad.
DOCTOR OWL: You run the kitchen, the books, the trucks, and the crew. If you hired someone to do all that, what would you pay them?
FRANKIE: A lot. On a schedule. They’d quit otherwise.
An original Fabled Forest moment. Similar stories about Doctor Owl and the forest’s owners are in Management and Leadership for Small Businesses, Book 1 of Dr. Paul’s Fabled Forest Business School.
Frankie has a decision to make. Keep reading. You’ll see what he does, and why it works for your restaurant too.
Similar stories in Management and Leadership for Small BusinessesDr. Paul’s Fabled Forest Business School, Book 1 See the Books →
Draws or Salary
How Do Restaurant Owners Pay Themselves?
How you pay yourself depends on how the restaurant is set up. This is general, and the rules have details. Your CPA decides what fits you.
You take money out when you choose. No paycheck. You owe income and self-employment tax on the whole profit, whether you took it out or not.
You are an employee of your own restaurant, with a regular paycheck and taxes withheld. Profit left after that can come out as distributions.
Frankie took draws whenever the drawer looked full. Nobody decided the amount. It just happened, week by week.
A Fair Wage
What Is a Fair Salary for a Restaurant Owner?
Ask one question: what would you have to pay someone else to do your job? If you run the kitchen, write the menus, manage the crew, and read the numbers, price that role in your area.
Too low
Hides your real cost. The restaurant looks more profitable than it is, and it can cause tax problems.
About right
What it would cost to replace you. The restaurant covers it, and profit is real.
Too high
Takes profit the restaurant needs for reserves and growth, and calls it a wage.
Show the Math
How Much Profit Can an Owner Take Out?
The salary covers the family. Distributions are what the restaurant can spare after it takes care of itself. Here is a sample quarter. Illustration numbers only.
| Line | Amount |
|---|---|
| Profit for the quarter, after the owner’s salary | $21,800 |
| Less tax set-aside (about 20%) | ($4,400) |
| Less reserve top-up | ($8,400) |
| Distribution for the quarter | $9,000 |
One more check before the distribution check gets written: profit is not cash. Look at the operating account and your weekly cash forecast. The distribution cannot take the account below its floor.
Build the family budget on the salary only. Treat distributions as a bonus.
Set It Up
How Do You Set Up Owner Pay?
- 1
Price your job
What would it cost to hire someone to do what you do?
- 2
Set a salary or a fixed draw
Same amount, same day, every pay period.
Frankie’s FixFrankie set one fixed amount every other Friday. Slow week or great week, same number.
- 3
Set aside tax
Hold back what your CPA tells you, every quarter.
- 4
Take profit quarterly, by formula
Profit, minus tax set-aside, minus reserve top-up, checked against cash.
- 5
Review once a year
Raise your pay when the restaurant can carry it.
From Dr. Paul’s Work as a Business Consultant
What a Business Consultant Looks for in Owner Pay
When Dr. Paul reviews a restaurant’s numbers, owner pay is one of the first things that tells the real story. A restaurant that only shows a profit because the owner works for free is not profitable yet.
The fix is rarely dramatic. It is usually a fixed amount on a fixed day, and a separate decision, every quarter, about profit.
If the restaurant cannot pay you a fair wage, it is not a business yet. It is an expensive job.
From Dr. Paul’s Fabled Forest
What Frankie Did Next
Three months later, Frankie’s family had a calendar on the fridge. Same number, every other Friday.
FRANKIE: No more soup weeks. No more couch weeks. Just weeks.
DOCTOR OWL: And the great weeks?
FRANKIE: They go to the restaurant now. Reserve first. Then, at the end of the quarter, whatever’s really left comes home.
DOCTOR OWL: And your partner?
FRANKIE: (actually sitting down for once) Says it’s the first time we could plan a vacation.
The lesson for your restaurant: Pay yourself a fair, fixed wage first. Take profit on a schedule, by formula, after the restaurant takes care of itself.
In Your Business Plan
How Does Owner Pay Go in Your Business Plan?
Lenders look for owner pay because it tells them whether the restaurant really works. Related guides: How Do You Read a Restaurant Income Statement?.
- 1
Show your salary as an expense
Even if it starts modest.
- 2
Run break-even with your salary included
A restaurant that only works if you work for free does not work.
- 3
Show a raise when the numbers allow
Tie it to milestones in your projections.
- 4
Keep personal and business separate
Separate accounts and a written pay schedule.
This is one piece of the full plan. See How to Write a Restaurant Business Plan for every section, start to finish.
Not sure what the restaurant can really pay you?Dr. Paul works with owners to set a fair wage, a profit formula, and a cash plan that supports both.
Questions
Restaurant Owner Pay Questions
How much do restaurant owners pay themselves?
It varies by size, profit, and structure. A good starting point is a fair wage for the job you do, roughly what it would cost to hire someone else, with profit taken separately on a schedule.
Should a restaurant owner take a salary or draws?
It depends on your legal structure. Sole owners and single-member LLCs usually take draws. S corporation owners take a reasonable salary plus distributions. Ask your CPA what fits.
When can I start paying myself from my restaurant?
Plan for it from day one, even if the amount starts small. Build it into your projections so you know when the restaurant can carry a full wage.
Beginner’s Guide to Restaurant Financial Statements and Financial Ratios
Owner pay, profit, taxes, and the cash behind all of it, in plain English.