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The Complete Guide to Restaurant Profit Margins

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The restaurant business is not suitable for the meek. Profit margins dictate whether or not restaurateurs’ aspirations are viable businesses, even though passion is the flame that ignites the pursuit of their goals.

However, profit margins are getting thinner across the board in the restaurant business. For instance, restaurant profit margins in Philadelphia were a solid 15-20% two decades ago. Today, this foodie town’s profit margins have decreased to 4–7%, which is on an equal level with the national average.

With a thorough guide on how to increase revenues sustainably, we’re here to help your restaurant business succeed.

‍How to increase the profit margins of restaurants?

You can perform this in two different ways: by raising overall sales and by lowering overhead costs.

Although there are numerous methods that can assist you to boost revenue and cut costs, we’ve compiled the list from the most practical ones.

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Increasing your restaurant’s sales volume has a significant positive impact on your profit margins.

Here are some that you can adopt to increase your restaurant sales volume:

1. Use an online ordering method

Increase takeaway and delivery orders by integrating an online ordering system into your restaurant operation. Some people find eating out to be bothersome and would rather to buy food online and stay in.

2. Establish an incentive scheme

Customers are encouraged to frequent the restaurant more often through loyalty programs. Since consumers are inclined to tell their friends and family about their loyalty rewards, they can also boost recommendations. Your program must be user-friendly for users!

3. Streamline your menu design

Examine what’s on your menu. Create a menu that includes those things after determining which ones are the most popular, profitable, and bestsellers. It’s a good idea to include pictures of these goods.

You can also experiment with changing the menu’s dish names and descriptions to pique customers’ attention.

4. Spend money on technology

Make use of POS (Point of Sale) software that efficiently collects analytical data. Even though it can be expensive up front, investing in technology will help you evaluate and enhance your restaurant’s operations. As a result, over time, your profit margins will increase.

5. Online market

Your company will benefit from having a strong online presence in the modern world. Social networking is a popular way for individuals to learn about new eateries. Therefore, make sure you are engaged on popular social networking sites.

‍A lot of visitors also visit a restaurant’s website to learn more or to look at the menu. Therefore, you need to ensure that your website is current and functions smoothly.

‍Cost reduction for your restaurant

Here are some suggestions for lowering your restaurant’s expenses so that you can increase your profit.

1. Reduce the price of the goods sold

The cost of items sold is typically covered by one-third of a restaurant’s income. Because of this, it’s critical to reduce food expenses without compromising food quality.

Look into different vendors with whom you might bargain a cheaper price for comparable ingredients. Additionally, you can try to lessen food waste.

2. Calculate labour costs

Payroll expenses for your team will also consume a sizable percentage of your revenue. You can balance managing the staff’s schedule for meagre extra compensation with giving them more benefits. When the monthly sales exceed your target levels, you can pay your workers additional bonuses. Adding more days off is another option.

3. Watch out for food waste and theft.

Waste management and internal theft are two of the biggest problems in the restaurant industry. To reduce waste, enhance and increase the accuracy of the food inventory system.

In order to keep an eye on things and deter theft, you can also put security cameras.

The highest profit margin is what you should aim for as a restaurant owner. However, the typical profit margin of the restaurant you own will vary depending on its type.

In a business with notoriously thin profit margins, it’s more important than ever to have a guide on how to increase revenue. At Fleksa, we know the restaurant business inside and out, and can help you find new ways to succeed with digitised technology and fast automation processes. Contact us today to learn more about how we can help your restaurant enhance its profit margins sustainably.

If you are looking to enhance your restaurant profit margins, then reach out to us. We are here to help!

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