Restaurant Profit Margins

Simple Ways To Increase Your Restaurant Profit Margin

If you have a restaurant, you can have a sustainable, profitable business for a long, long time. The food business has been known to create an amazing ROI if setup properly. Here's a typical profit margin on a food item. Take the total ingredient food cost of a particular item. Multiply it by 3. That should be the price on the menu. The margins should break down as 1/3 of income for food cost. 1/3 for operational cost (wages, utilities, etc.,) 1/3 profit. Of course, these vary depending on the style of your restaurant, and how busy you are.

What do you need in order to increase your restaurant profit margin?

Simple, you need to either lower your expenses, or raise your gross income.

Increase Your Profit Margin By Increasing Your Gross Income

The more people that come to your restaurant, the higher your sales and profits will be. Also, as you serve more meals your purchasing power will go up, and your expenses will go down. (back to improving income….)

Of course, you can raise the menu price on all items and that will increase your profit margin.

Another possibility for improving the restaurant profit margin is to get your staff to promote the most profitable items on your menu. Identify the most profitable items and promote them well. Do everything you can to ensure that these ‘most profitable items’ become the darling items of your customers.

Keep in mind that the most profitable items are not always the most expensive. One you have these identified, you may instruct your servers to subtly promote these items to your guests. The more of these items that are sold, the higher your restaurant profit margin would be.

Customers also love to feel like they are getting a great deal. One excellent way to increase your restaurant profit margin is to offered bundled meals. It is often extremely profitable to sell fixed menus such as salad + entrée + desert or appetizer + entrée + desert. This would offer the customer more value for dollar and you a higher restaurant profit margin

Of course, treating your customers like a kings and queens goes a long way toward increasing your restaurant profit margin. People love to be pampered and treated with personal attention. They would definitely relish the fact that they are fawned upon at your restaurant and choose to return to enjoy the experience again and again thereby increasing your sales and profits.

Cutting Your Expenses To Increase Your Restaurant Profit Margin

There are a lot of little places you can trim expenses.

For example, you can tighten your staffs’ schedules. Notice how often you have more kitchen staff or wait staff than you need. You can probably tighten your staff cost without affecting the quality of service to your customers.

You can source out other sources of supplies. Then negotiate hard between the various suppliers to save money on your raw materials.

Different types of restaurants have different profit margins. A small fine dining restaurant has a higher profit margin per meal sold than a take-out hamburger stand. The hamburger stand makes their profits by selling a high volume. The fine dining establishment makes huge profits on each gourmet meal (with wine etc.,) sold.

When you are starting a restaurant it would be wise to find out what your competitions ratios and profit margins are.

It’s smart to analyze your bottom line and restaurant profit margins weekly, or at least monthly.