Everyone is food service can see that restaurants are a tricky business. From turnover time to wasted product to the number of employees on the clock — every detail matters when money is on the line.
Part of what makes restaurant work so stressful is the sheer amount of work it takes to make a profit. It takes s village to make sure the food ordering, prep work, and execution go off without a hitch on any given day. All for most restaurants to make a profit margin of between just 6 and 22%.
Looking for ways to make more money in the restaurant business? Check out these 7 tips to cut costs, bring in more business and make your restaurant more money.
Restaurants will usually make money by applying the straightforward business concept of selling more than they spend. The profitability of the restaurant depends on how well the restaurant owner or manager keeps track of specific expenses, such as wages and cost of goods sold (COGS).
Manage reordering and inventory
Like stated above, use your POS to your advantage. If you have 3 items that sell like crazy, find out why. Put similar or complementary items on the menu. You can also see what items are frequently bought together and teach your staff how to upsell to people the right way.
Teach your staff how to upsell
Servers, bartenders and front-of-house staff should be well versed in your menu and know how to sell up. Fast food restaurants do this well by always asking if you’d like to buy a larger french fry or drink for a small amount more.
At seated restaurants, your staff should always be trained on how to entice customers with appetizers, desserts, specials, drink, and top-shelf liquors.
Average Restaurant Profit Margin for Independent Operators
FAQ
How do restaurants make a profit?
How long does it take a restaurant to become profitable?
Which type of restaurant is most profitable?
How can a restaurant be profitable?
The profitability of the restaurant depends on how well the restaurant owner or manager keeps track of specific expenses, such as wages and cost of goods sold (COGS). Establishing a dependable inventory management system to keep track of ingredients can also impact profitability.
Will a restaurant turn a profit in the first year?
You likely won’t turn a profit in your first year. This is normal. Most restaurants only start to turn a profit within three to five years. But instability doesn’t mean you need to feel alarmed. If your financial reports are showing that your revenue is good and you can reasonably project rising revenue, you’re likely okay.
How can a restaurant increase profit margins?
As you start out, remember to keep expectations in check, especially during the first few years. Once you have become established, you can look for creative ways to improve profit margins, like adding revenue streams that increase restaurant profitability through sales that go beyond food and beverages.
What are the most profitable restaurant types?
The restaurant industry includes other types of restaurants with lower investment costs and a respectable average profit margin. Following are the six most profitable restaurant types. 1. Bar In the restaurant business, bars have the highest profit margins. The markup on alcoholic beverages is much higher than for food.