Credibly Logo

7 Ways to Increase Your Restaurant’s Profit Margin

Share This

Running a restaurant is no easy task. Aside from the day-to-day challenges of ensuring your guests are happy and your kitchen is running smoothly, you also have to worry about making money. And in order to make money, you need to have a healthy restaurant profit margin.

That’s why financing can be so important for you as a restaurant owner – it can help you improve your restaurant’s margins and increase your bottom line.

In this blog post, we will discuss 7 ways in which financing can help you and your business achieve a higher average profit margin.

What Is a Restaurant Profit Margin?

At its simplest, restaurant profit margin refers to the difference between a restaurant’s revenue and its expenses. In other words, it is the amount of money that a restaurant makes after all of its costs have been taken into account.

While this may sound fairly straightforward, it can be difficult to calculate restaurant profit margin accurately since there are many factors that can influence a restaurant’s costs and revenue.

How Much Profit Should You Make in a Restaurant?
One common question among your fellow restaurant owners is how much profit they should aim to make. There is no exact answer. Buffet style restaurants can make anywhere from $1,100 to $3,500 daily; a fast food restaurant can make anywhere between $10,000 and $12,000.

What Is the Average Restaurant Profit Margin?

In order to understand how restaurant profit margin works, it is also important to understand the average restaurant profit margin. This term refers to the average amount of money that a restaurant makes on each dollar of sales.

Typically, the average restaurant profit per month will be smaller than its restaurant profit margin, since there are many factors that can influence costs and revenue in ways that lower the restaurant’s average profit margin.

Here’s how you can calculate your restaurant’s average profit margin:

  1. Calculate your business’s total revenue by adding up all of the money that you have earned from your restaurant sales over a specific period of time.
  2. Next, add up all of your restaurant’s expenses over the same period of time. This includes things like food costs, labor costs, rent, marketing expenses, and more.
  3. Calculate your restaurant’s average profit margin by dividing your restaurant’s total revenue by your restaurant’s total expenses.

7 Ways to Improve Average Profit Margin for Restaurants Through Financing

Average Profit Margin for Restaurants

While the average profit for your restaurant is an important metric for owners to track, it is also important to explore how to improve your restaurant’s average profit margin through financing.

Here are some of the key strategies you can use to enhance your average restaurant profit margin:

1. Buying in Bulk to Help Reduce Costs

One effective way to improve your restaurant profit margin is by buying in bulk. This allows you to take advantage of lower costs for food and other supplies, which can help you improve your average profit margin.

You can do this by negotiating with your suppliers, and also by looking for restaurant supply companies that offer bulk discounts. Also, be sure to take into account your restaurant’s demand and turnover rates when you decide which items to buy in bulk.

2. Investing in Better Trained Staff

restaurant profit margin

Another way to improve restaurant profit margin is by investing in better staff training. This can help you reduce labor costs, which can have a significant impact on profit margin.

To achieve this, you can invest in training programs for your wait staff, kitchen staff, and restaurant managers. These programs can help staff become more efficient and better able to handle customer requests, which can reduce the amount of time that employees need to spend on each order.

Additionally, you can invest in management training programs to help your staff stay up-to-date with the latest industry trends and best practices.

This can help you keep labor costs under control, which can improve restaurant profit margin over time.

3. Investing in More Efficient Equipment

In addition to investing in staff training, you can also improve your restaurant’s average profit margin by investing in more efficient equipment. This can help reduce food and energy costs, which can have a big impact on restaurant profit margin.

For example, you can look for new kitchen equipment that is more energy-efficient, such as dishwashers and cooking appliances that use less water or electricity.

Additionally, you can explore new refrigeration technology to keep food fresh for longer periods of time, which can also help reduce expenses over time.

4. Investing in Marketing Agencies and Marketing Campaigns

Another way to improve the average profit of a restaurant is by investing in marketing agencies and marketing campaigns. This can help your business reach new customers, which can boost sales and increase restaurant revenue over time.

Some effective restaurant marketing strategies include using social media platforms like Instagram or Facebook to promote restaurant discounts, hosting special events that bring in new customers, and partnering with influencers to create restaurant marketing campaigns that reach new audiences.

There’s a Better Way to Handle Seasonal Slowdowns

4 ways to keep things moving till business picks up again

5. Developing a Loyalty Program

You’re also able to improve your average restaurant profit margin by developing a loyalty program for customers. This can help build stronger relationships with regular customers and increase customer retention rates, which in turn can boost revenue.

To set up a restaurant loyalty program, you should offer special discounts or reward points to regular customers to encourage repeat business. You can also offer coupons, or create a rewards app that makes it easier for customers to keep track of their loyalty benefits.

Overall, developing a loyalty program can be a great way to improve your restaurant profit margin and build stronger relationships with your regular customers.
6. Investing in Renovations for Your Restaurant
Another way to improve your restaurant profit margin is by investing in renovations. This can help create a more attractive and inviting space for customers, which can have a positive impact on sales and revenue.

Some effective renovation ideas include adding new seating options or updating the decor to make your restaurant look more modern and appealing. You can also consider renovating your kitchen, or redesigning the layout of your restaurant to make it more efficient and easier to navigate for both customers and restaurant staff.

Ultimately, investing in renovations is a great way to improve your restaurant profit margin by boosting sales and attracting new customers.

7. Using Tech or Investing in Systems and Processes

Increase Your Restaurant Profit Margin

Finally, you’re also able to improve your restaurant profit margin by upgrading technology or investing in systems and processes that make restaurant work less strenuous. This can help reduce employee turnover rates over time, as well as increase restaurant efficiency and productivity.

Some effective tech solutions include restaurant software systems that track sales and restaurant inventory, or restaurant ordering apps that let customers place orders and pay for their meals directly from their phones.

What Type of Financing Is Best-Suited for Restaurants?

There are a variety of different financing options available for you as an owner, and depending on your restaurant’s unique needs, some types may be more suitable than others.

  • Working Capital Loans – A working capital loan can be a great option for restaurant owners who need to purchase inventory, renovate their space, or invest in marketing and advertising to drive sales.
  • Merchant Cash Advance – A merchant cash advance can be a good option for restaurant owners who need quick access to capital, as this type of financing is typically processed and approved more quickly than other types of financing.
  • However, restaurant owners should keep in mind that with a merchant cash advance, remittance amounts can vary depending on the restaurant’s monthly sales volume.
  • Business Expansion Loans – Business expansion loans can be a good option for restaurant owners who want to purchase new restaurant equipment or open additional restaurant locations.
  • These types of loans are typically secured with collateral, so restaurant owners will need to provide property or equipment as security for the loan.
  • Line of Credit – A restaurant owner can also consider applying for a line of credit, which can be a good financing option if you need access to funds on an ongoing basis.
  • This type of loan offers restaurant owners the flexibility to withdraw and repay funds as needed, depending on their restaurant’s operating needs and cash flow.
  • Equipment Financing – Finally, restaurant owners can also consider applying for equipment financing to purchase restaurant equipment or restaurant technology systems. This type of loan is typically secured with collateral, so restaurant owners will need to provide property or equipment as security for the loan.

When choosing a financing option, it’s important to carefully weigh your restaurant’s unique needs and financial goals against the pros and cons of each option to find the financing that is best-suited for your restaurant’s growth and success.

With the right financing in place, you can rest assured knowing that your restaurant is well-positioned for long-term success and profitability.

Here’s the Recipe for Finding the Right Financing for You

Short-term, long-term, equipment loan, or flexible financing–we’ve got just the thing for you.

Speak to a financing expert and find financing that fits your needs, like 30,000 businesses across the U.S. have with Credibly.

Speak to a Financing Expert