Rarely do we open a restaurant without the aspiration to open many. Sure luck plays a role but there are some folks out there that seem to have the secret to scaling. Today we sit down with Greg Willman, an investor and restaurateur who, after becoming the largest Qdoba franchisee in the world, has set his sights on dominating with a new brand. In our conversation he unpacks the steps to scaling successfully and the mistakes to avoid along the way.
Full Comp is brought to you by Yelp for Restaurants: In July 2020, a few hundred employees formed Yelp for Restaurants. Our goal is to build tools that help restaurateurs do more with limited time.
We have a lot more content coming your way! Be sure to check out our other content:
I’ll be the first one to say that if you’re looking to achieve greatness in our industry, focus is the key. Today’s guest, Obie Ostergard, may just prove me wrong. A trained chef turned operations guru, Obie has mastered the hardest parts of our industry in both front and back of house. In our conversation Obie unpacks the lessons he’s learned and the tools he’s leveraged to become a jack of all trades in the trade industry.
Full Comp is brought to you by Yelp for Restaurants: In July 2020, a few hundred employees formed Yelp for Restaurants. Our goal is to build tools that help restaurateurs do more with limited time.
We have a lot more content coming your way! Be sure to check out our other content:
If you’re a restaurateur aiming to scale your business, the idea of increasing profitability can be intimidating. This blog will detail what factors influence restaurant profit margins, pricing strategies that prove effective, how technology helps boost income.
Key Takeaways from Our Restaurant Profitability Strategies
Understanding gross vs. net profit margins and the impact of food costs on profitability.
Strategies such as pricing, menu optimization, cost management and leveraging technology to help reduce expenses while increasing profits.
Benchmarking against industry averages and exploring alternative revenue streams are key to staying competitive in the market with high profit margins.
Understanding Restaurant Profit Margins
Determining which factors impact a restaurant’s profit margins is at the first step to maximizing financial gain. These factors include gross and net profits, food expenses, and labor costs. Let’s explore these topics in detail below.
Your gross profit margin equals the total revenue minus cost of goods sold. The net profit margin is derived from subtracting operating costs along with taxes from that same figure. By understanding both margins and using an online calculator, you can make impactful business decisions to maximize your restaurant’s profitability. Tracking these two metrics offers a complete picture of financial health for any restaurant.
The Impact of Food Costs on Profitability
Restaurants can increase their profitability significantly by accurately monitoring and controlling food costs, as they may comprise up to 33% of a restaurant’s sales. Keeping track of the average Cost of Goods Sold (CoGS) is essential for budgeting expenses, which are all items used in preparing dishes or beverages during a certain period. It also helps restaurants figure out what strategies will maximize their profits per plate served on the menu.
There are numerous tactics that restaurants can use in order to keep an eye on these expenses such as optimizing menu options, improving operational efficiency, adjusting pricing structures and minimizing wastefulness when it comes to food products.
Research indicates investing $1 towards reducing unnecessary expenditure has the potential yield savings amounting to around $7!
Labor Costs: Balancing Efficiency with Quality
A restaurant must carefully manage labor costs in order to stay profitable. This expense accounts for as much as 30-50% of sales, and high staff turnover rates up to 73%, can have a major impact on the bottom line. To maintain a healthy profit margin while still delivering top-notch service quality, technology should be used judiciously when it comes to workforce optimization and anticipating staffing needs.
Smart scheduling tactics can also help keep your personnel expenses under control without sacrificing customer satisfaction levels. Preserving this balance between labor costs and excellent service is key for maintaining profitability long term.
Benchmarking Your Business: What’s the Average Profit Margin?
Having knowledge about the typical profit margins for various kinds of restaurants can help you set attainable objectives and compare your organization against industry standards. This section looks at how much money full-service, quick-service, and catering businesses usually make.
With this info to hand, you are in a better position to evaluate the potential success of your restaurant and make wise decisions that will enable it to remain competitive within its market space.
Full-Service Restaurant Profit Benchmarks
Full-service restaurants typically have a profit margin of between 2 and 6%. A number of aspects can greatly influence their profitability, such as seasonality, quality of service, menu prices, labor costs (staff wages), food waste or spoilage amounts due to incorrect storage/preparation methods in the kitchen, employee theft incidents that go unnoticed by management, high turnover rate among staff members; type of ownership structure whether it is a single proprietorship, partnership or limited liability company; and geographic location.
Customer volumes could significantly affect full-service restaurant profit margins–more customers mean higher sales resulting in better returns for the business.
Quick Service Restaurants: A Look at Profitability
The profitability of quick-service restaurants can vary significantly and the type of model you go with will determine how much profit you can make.
Food trucks may have as little as 6-9%, fast casual eateries approximately 6-15% in terms of their margins, and pizza chains fall somewhere in between these ranges.
As such, when deciding to invest into this industry, consider factors like strategic location selection, effective operations management & menu design that are tailored to your customer’s needs or preferences.
Catering Services: Understanding Their Financial Model
Catering businesses usually hold a profit margin between 7-8%.
Income from catering operations stems from food and beverage sales, selling merchandise like meal kits or cookbooks, catering special events, and offering gift cards too.
Factors that can affect how profitable they become would be looking at things such as event volume, staffing models, operational effectiveness with pricing strategies plus location.
Strategies to Boost Your Restaurant’s Bottom Line
Next, let’s look at pricing techniques, menu optimization options and operational efficiencies which will boost financial health and ensure long term success.
Pricing Strategies to Enhance Margins
Pricing strategies play a crucial role in boosting profit margins. Tactics such as psychological pricing, charm pricing, premium pricing, decoy and anchoring can be used to draw customers’ attention and grow sales, resulting in higher profits.
Menu engineering is an effective technique for achieving increased profitability within restaurants. This approach combines psychology with data-driven design concepts that enhance the end goal of financial gain from patrons.
Optimizing Menu for Maximum Profit
Maximizing profit can be achieved by focusing on high-margin items and reducing low-margin ones.
High margin products typically have higher cost of goods sold and price, meaning that revenue will outweigh the expenses associated with them. By concentrating resources to increase these item sales, restaurant profits can be improved greatly – up to 20%.
Menu engineering combined with an appropriate pricing system provides financial benefits as it helps manage food costs while boosting the bottom line of a business.
Streamlining Operations to Reduce Costs
Making operational processes more efficient can help you save money and become better organized. To do this, technologies like automation tools, streamlining of procedures, proper food handling to prevent wastefulness and controlling expenses should be adopted.
For instance, an effective layout for the kitchen could significantly upgrade operations by cutting down delays or jams caused due to workflow issues as well as boosting productivity- both of which would assist with managing costs while improving overall profits.
Harnessing Technology to Grow Profits
Technology is an essential factor in scaling profits. Solutions that improve table turnover and minimize labor costs can be used to manage the flow of a successful restaurant, resulting in larger profit margins.
Improving Table Turnover with Tech
Optimized table turnover rates can bring benefits to a restaurant’s bottom line.
Technology which could improve this include contactless dining, point-of-sale units for servers, reservation systems and self service options.
Digital menus have the potential to streamline the ordering process as well offer faster services like contactless payments or menu customization features that help restaurants serve more customers thereby increasing their revenue.
Reducing Labor Costs Through Automation
By automating certain activities and procedures such as ordering, booking, and stock-taking – efficiency will go up drastically, training expenses will diminish significantly, turnover rates are minimized greatly, and schedule management is optimized for effectiveness.
Loyalty Programs: Encouraging Repeat Business
A loyalty program can be a successful tool to attract repeat business and sustain customer loyalty. With exclusive advantages like rewards, extra income for the company is possible due to frequent transactions from customers, leading them potentially to increase their spending as well.
Navigating the Challenges of Low Profit Margins
For restaurant owners, low profit margins can create difficulties. To contend with this issue and guarantee the sustainability of their business, they must manage their “Big Three” expenses (e.g., labor costs) while staying up-to-date on market trends.
Tackling the “Big Three” Expenses
Maximizing profit margins in the restaurant industry is dependent on effective management of three main costs – the cost of goods sold, labor and overhead.
Proper planning that incorporates conservative goals along with careful evaluation when making cost-saving decisions are ways to effectively monitor these expenses.
Steps such as preventing wastage, regulating portion sizes, ensuring timely delivery of items purchased, updating inventory regularly for optimization purposes, strictly observing economic regulations – all play a role towards better managing “Big Three” expenditures incurred by restaurants thus helping them preserve their profits.
Having accurate calculations for pricing also forms part of this strategy and helps minimize risks associated with overspending or underspending thereby controlling overall spending related to goods sold.
Adapting to Market Trends to Stay Competitive
In order to remain competitive in the restaurant industry, it is necessary to keep up with evolving market trends and modify one’s business model accordingly.
Examples of prevailing current trends include: a focus on health and wellness, increased delivery/take-out services, sustainability awareness, ethnic dishes from global cuisines, and customer opportunities customization & personalization. Experiential dining has become quite important amongst diners.
Following these strategies provide you with a strategic advantage when competing against others in this dynamic industry.
Case Studies: Success Stories of Profitable Restaurants
This section reviews the tactics and strategies of successful restaurants, highlighting changes in operations and creative methods to improve profitability.
Transforming Operations for Better Margins
Optimizing menus, managing costs and collaborating with food delivery services have all helped restaurants increase their profit margins.
Harnessing the potential of restaurant software solutions combined with delivering great customer service can provide a route to improved financial performance too.
Innovative Revenue Streams
Another option would be exploring alternative revenue streams and business models, such as merchandise, meal kits, cookbooks and providing catering services or special events. Offering gift cards can help diversify their sources of income. All these strategies have potential for enhancing your restaurant’s profits over time while ensuring its continued success in this competitive industry.
Summary
To maximize the profitability of your restaurant, it is essential to invest in strategies such as pricing optimization, menu adjustments and leveraging technology to keep up with market trends. By putting these methods into effect now, your profits will increase dramatically while simultaneously increasing customer satisfaction levels.
Frequently Asked Questions
What is a good profit percentage for a restaurant?
The average profit margin of a restaurant usually lies between 3-5%, although in certain cases, it could range from 0 to 15%. When considering what an appropriate level of profitability for restaurants is – 10-20% would be the recommended scope. This suggests that having good profit margins for a typical eatery should fall within this boundary.
Why are restaurant profit margins so low?
Running a restaurant profitably can be difficult due to high expenditure in areas such as inventory, labor and rent. This is usually compounded by the need for restaurants to maintain competitive pricing strategies which often lead to low profits margins. Consequently, owning a successful eatery involves facing numerous challenges in order to maximize returns and boost profitability.
What food has the highest profit margin in a restaurant?
Restaurants looking to increase their revenues should take advantage of the cost-value ratio offered by fries, as they are not expensive yet appear to be worth much more. Burgers, pizza slices, tacos and snacks such as wings or small bites also generate substantial profits for any food establishment.
How much money do restaurants make?
On average, the monthly revenue of a restaurant can reach up to $40,000 with an average profit margin ranging from 3-5%. While newly opened restaurants typically make approximately $112,000 in one month’s time on average. Most establishments generate around $40500 per thirty days.
What factors contribute to restaurant profit margins?
Restaurant profit margins are heavily reliant on gross and net profit, labor expenses, and the cost of food. All these elements have to be taken into account for one to determine a successful margin in their business.
We’ve all heard the stories about how low-margin our industry is but, the truth is that there are restaurants and restaurant groups out there that do make great money. And you can too.
I’m going to be providing you with smart tactics and methodologies to dramatically increase restaurant profit margins and your financial sustainability.
Key Takeaways Restaurant Profit Margin Guide
Gain financial insight and maximize your restaurant profits with menu optimization, sales-boosting techniques, cost-reduction strategies & more.
Leverage technology to streamline operations and gain valuable insights into your business.
Key performance indicators that have the greatest impact on profitability.
Understanding Restaurant Profit Margins
Gross profit margin and net profit margin are two factors to consider when trying to understand the most average restaurant revenue and profit margins. These measurements act as barometers for a business’s financial health.
Understanding these indicators is key in ensuring there is enough room between cost of goods sold (COGS) and total revenues, which will ultimately determine whether or not your company can sustain itself financially on an ongoing basis.
Gross Profit Margin
The gross profit margin is an essential metric that helps identify a restaurant’s profitability, showing the amount of income gained from COGS and labor.
Financially successful restaurants have profits margins ranging around 50%. This figure underscores the importance of optimizing costs in order to maximize restaurant revenues achieved through smart spending and efficient operations.
Net Profit Margin
Today’s restaurant industry shows an average net profit margin of 7%.
Net Profit Margin is obtained by deducting all expenses associated with operations, such as labor costs, overhead expenses, fees and other operating outlays, from gross revenue to calculate overall business profits (known as ‘net profit’).
Gross Profit Margin evaluates income generation, while this more comprehensive approach factors-in every expense when assessing your restaurant’s fiscal health.
Factors Affecting Profit Margins
Profit margins are affected by obvious factors such as food costs, labor expenses and rent. The type of the restaurant, its location size along with ownership structure can all influence margin, as well. Competition also plays a significant role in optimizing a restaurant’s financial health.
We must become intimately aware of how these factors can impact our profitability so that we can plan accordingly from the earliest stages of the venture.
Average Profit Margins by Restaurant Type
Understanding the average profit margin of different kinds of restaurants can be a really useful resource for entrepreneurs.
Being aware that the potential profit margins range from 6-9% for fast food and food trucks, 2.5 – 15 % for cafes, 3 – 5% full service restaurants and eateries, as well as 7 – 8 % catering businesses will help in establishing realistic goals.
We must consider what the true benefits and limitations of each tier of dining are when evaluating the viability of our restaurant business venture.
Strategies to Improve Restaurant Profit Margins
In light of the significance that restaurant profit margins have, it is time to look into effective methods for increasing margins.
We will consider menu modifications, approaches aimed at augmenting sales volume as well as tactics designed to reduce expenses all directed towards maximizing one’s net income/restaurant profits and its respective margin.
Menu Optimization
Menu optimization can be a great tool to maximize revenue. This is done by analyzing sales data, making adjustment to the menu based on that data and utilizing what is known as ‘menu engineering’, which uses elements from psychology, analytics and design together, creating menus that generate more profit when customers order them.
A popular way of helping restaurants determine how well their menu is performing is through using a Menu Matrix. It gives owners useful insights into arranging dishes based off importance- setting priorities according to profitability levels while also taking out unpopular offerings that won’t bring any benefit (or even losses). The result is a streamlined menu that is highly profitable.
Another amazing tool is a Benchmarking Analysis. This tool compares the prices of your menu items with the menu items of your competitors, highlighting opportunities to increase pricing to meet the market.
Sales Boosting Techniques
There are several techniques to increase sales volume, such as upselling, cross-selling and promotions or loyalty programs. The most effective tool I have found for scaling a restaurant’s per customer average sales is the Perfect Check. Click here to direct access to that training and template.
Cost Reduction Strategies
Finding ways to lower operating expenses, is a great way to increase profits.
By cutting back on labor costs, food waste and utility bills, our profit margins can be improved significantly.
Advanced inventory control tools, like Margin Edge and Meez, are highly effective in providing real time data and monitoring portion sizes can help in minimize food waste.
Leveraging Technology to Maximize Profits
Technology plays an important role when it comes to restaurant profits. By utilizing the proper software and tools, you can streamline operations while providing worthwhile insights for sound choices. Let’s explore the most common tech tools below:
Point of Sale (POS) Systems
Having a reliable Point of Sale (POS) system can prove to be extremely advantageous for restaurant management. A POS contains features such as inventory and menu management, employee tracking and sales monitoring which make the operations within the eatery more streamlined.
The best-rated systems are SpotOn, Toast, and Square that allow restaurants to optimize their processes while effectively keeping track of data pertaining to profit margins in particular.
By investing in a suitable POS platform owners can expect improved operational productivity plus increased profits overall due to greater efficiency levels afforded by this technology based solution.
Online Ordering Platforms
Online platforms can make it easier to increase sales, giving customers the convenience of ordering from their favorite restaurant. These applications offer many quick service restaurants several advantages including: bringing more people into your establishment, providing rewards programs for loyal patrons, and boosting brand visibility.
Staff Scheduling Software
The days of using an excel spreadsheet to do your staff schedule are done (or at least they should be.)
With the help of effective staff scheduling software, restaurants can optimize their employees’ schedules and significantly decrease labor costs in order to improve profit margins.
These systems also help with employee communication and retention and some services offer predictive analytics that can help you schedule labor more efficiently.
As a result, not only will you keep your restaurant operating expenses and operational costs low, but also potentially open up new horizons for increased profits from improved efficiency gains.
Monitoring Key Performance Indicators (KPIs)
Keeping an eye on metrics such as labor cost percentage and food cost percentage is crucial in order to maintain the financial health of a restaurant.
Regularly analyzing these key performance indicators (KPIs) provides insight into potential issues, allowing timely corrective actions to be taken which helps maximize profit margins for greater success of the business.
My favorite KPI’s to track are:
Voids/Comps
Per Customer Average Spend
Customer Frequency
Loyalty Sign Ups
Labor Overtime
Dessert Sales
Summary
Ultimately, with a sensible plan of action, successful tactics and intelligent utilization of technology, it is possible to scale your restaurant’s profit margin.
Optimizing menus, increasing sales revenue and decreasing expenditures – as well as taking advantage of current technology available – observing KPIs (key performance indicators) all combine to provide outstanding results in maximizing profits for any restaurant.
Now is an opportune time to take those first steps towards improving financial stability within your restaurant.
Frequently Asked Questions
What is a good profit margin for a restaurant?
The Corporate Finance Institute states that a 10% average restaurant profit margin rate would be thought of as average and 20% profitable, which makes it noteworthy.
Why are restaurant profit margins so low?
Running a restaurant presents numerous challenges due to costs such restaurant expenses such as rent, labor, equipment and inventory. As a result, restaurants struggle to keep prices low while staying competitive. Thus leading to razor-thin profit margins despite their hard work.
Do restaurants make a lot of profit?
Net profit margins for restaurants usually vary between 2-6%, yet many fail to make a sustainable income due to economic and size issues. For a full service restaurant become profitable, it normally takes two years of hard work from restaurateurs.
What is the profit margin for the food industry?
The net profit margin of the food industry has, in general, been between 20-30%. Yet rising expenses this year have put a strain on the cash flow of many operations within the sector.
How much do restaurant owners make?
Restaurant owners can expect to receive an attractive pay package that could reach up to $333,000 in annual earnings. According to ZipRecruiter’s data, the typical salary for this role is about $97k per year and wages vary from as low as 45 grand annually to a maximum of 6 figures yearly. They make around 47 dollars hourly on average.
My name is Josh Kopel, and with over 20 years of experience in the restaurant industry, I’ve journeyed from an enthusiastic beginner to a seasoned owner and operator. Through trials, triumphs, and everything in between, I’ve gathered a wealth of knowledge that I’m eager to share with you.
Crafting a successful restaurant business plan is an art and science, one that I’ve honed over years of practical experience. In this comprehensive guide, I’ll walk you through each step, infusing insights from my own journey to help you create a plan that’s not just a document, but a roadmap to success.
Restaurant Business Plan Key Takeaways
Ensuring the product/market fit for your restaurant that appeals to your target audience
Identifying potential locations and analyzing their demographics for leasing or purchase
Developing an effective marketing plan, operations & staffing plans, financial projections & analysis, budgeting strategies and external partnerships to ensure success
Crafting Your Restaurant Concept
A well-crafted restaurant concept is a fundamental part of any successful business and allows you to display your talent, experience, and restaurant ideas and understanding of the needs within your intended community. It’s important to dig deep and determine what makes your concept truly unique.
Whether opting for casual or fine dining, incorporating your taste and unique service style will help create an amazing culinary experience. A key tool is to analyze and incorporate current trends, leveraging he attention of the market and your target customers.
We begin the process of developing a comprehensive business plan with an executive summary focused on showcasing both cuisine type and services. Include a mission statement and detailed objectives illustrating intention in focus for both your partners and potential investors.
When aiming to draw the right customers, we must be precise in defining our target market. We’re able to tailor the concept and marketing strategy by looking at such elements as age range, income bracket, location preferences and dining habits. Crafting a winning business plan begins with our vision but is centered around those we serve.
An exhaustive analysis of markets should go into this planning process. The better we understand our customers, the higher the likelihood of success.
Demographic data paired with industry trends is a recipe for success. Analyze consumer spending patterns and assessing competing restaurants locally are critical steps needed when forming effective business plans that have long-term potential. These efforts never stop as our community is constantly changing which, when tracked, leads to growth opportunities.
Location Selection and Analysis
When considering the ideal spot for your restaurant, it is essential to think carefully since your location will have the greatest impact on just how much revenue you garner through how easily you can draw in customers. Let’s take a look at techniques for scouting potential areas, examining local demographics, and deciding whether leasing or buying property would be best suited for success.
Scouting Potential Locations
Determining the best location for your restaurant should be a data-driven decision. It is essential to analyze the competitive landscape and obtain demographic data for the local area. Using resources such as the American Community Survey from the U.S. Census Bureau together with maps will give you a comprehensive look at each locality’s demographics. Talk to locals. This includes more than local residents. Chat with apartment managers, local business owners, and hotel concierge.
When determining the viability of a space, consider the key levers of profitability including sales per square foot and the opportunity to leverage the space to create multiple revenue streams.
Lease or Purchase Considerations
In almost all cases, buy the real estate if you can. In my over 20 years in the industry, I have see the power of being both the landlord and the tenant. Before making the decision, we must weight the pros and cons of leasing and purchasing the property.
There are many factors to consider including upfront costs, flexibility of the terms and long-term savings associated with each option. For most of us, our rent should not exceed 10% of projected revenue in order to remain within budget constraints.
Leasing often entails lower initial outlays but less control over occupancy expenses whereas buying gives businesses greater ownership possibilities while increasing capital expenditure initially required up front.
Ultimately, do what you can afford but view the decision through the lens of what will give you to most flexibility long term.
Designing Your Restaurant Space
The design of your restaurant needs to be planned carefully. We must blend form with function ensuring that the time spent in the restaurant for both our guests and our teams is time well spend.
When considering aesthetics, creating a mood board is an ideal way to show how different elements like colors and furniture will all come together. Even if you’re hiring a designer, I believe it’s critical to have a clear vision for how you want the space to look and feel.
The restaurant industry is a detail oriented endeavor. Key areas to consider include operational efficiency, seating/floorplan, lighting, sound, delivery infrastructure, catering infrastructure, and the ability to host events within the space.
Building a Strong Management Team
The success or failure of your restaurant will begin and end with your leadership team. Selecting individuals with relevant experience, such as customer service, accounting, inventory management, etc., and training them to understand the objectives laid out in your restaurant’s business plan is critical to long term success.
In your business plan, you should include a concise company description outlining how you and other members of the team are equipped to make this happen. Doing so will not only convey competence, but also demonstrate commitment from those involved in making sure that all operations run smoothly.
Having the right leaders onboard in the early stages of the process can improve confidence amongst stakeholders. After all, they want assurance that their money is being placed in the hands of savvy entrepreneurs. Your restaurant business plan samples the bright future they’re investing in. Assembling top talent ensures procedures like menu planning and staff development are done at the highest levels.
Marketing Strategies for Success
Having an effective restaurant marketing plan can be essential in order to create awareness, draw customers, secure foot traffic and increase revenue.
Developing a comprehensive strategy should include pre-opening promotion as well as post-launch campaigns that feature both online and offline tactics to reach the desired target audience. Outreach and promotion should begin long before the doors to your restaurant open. Social media is one key way of connecting with your potential customer base, while also having a website for visibility could create more opportunities for engagement.
Having said that, a boots on the ground approach is also incredibly effective. Leveraging community organizations like local churches and schools, local events like farmers markets, and sporting events are great places to sample your food and beverages prior to opening.
Reaching out to media influencers is critical as well. Making contacts within the local press, bloggers, other business owners, apartment managers, hotel concierge, and office managers will help boost awareness around your business too.; creating a fevered pitch when it comes time to open up shop!
Effective management of your restaurant while creating a fantastic experience for customers requires an inclusive operations plan. This scheme should contain elements such as interview processes, staff onboarding, ongoing training for the team, customer service policies, procedures, and opening/closing/side-work lists, and disciplinary policies to give your team the guidance they need in running the day-to-day operations of the establishment.
I would also include job titles and job descriptions for each position, projections on the amount of personnel required for each shift, and pay scales per role. Methods and mediums used when recruiting employees and standards applied during interviews. A structured operations plan will ensure that all activities in your restaurant run both consistently and smoothly while guaranteeing customer satisfaction is maintained at its peak levels.
Financial Projections and Analysis
It is essential to the success of your restaurant that you have realistic financial projections including detailed budgeting, expense tracking and revenue forecasting. Accurate analysis of the finances involved can help secure funding as well as make prudent decisions when it comes to running a successful business.
Budgeting and Expense Tracking
The key to successful management of a restaurant business lies in constructing an appropriate budget and controlling expenditures. This should include details such as food, labor, rent payments for the premises, money spent on marketing campaigns plus upkeep and any other related costs. To build this comprehensive financial blueprint you need to:
Calculate your expenses;
Forecast sales income;
Observe how much is being expended regularly so that it remains within allocated limits;
Account for unexpected expenses
Set up accounting systems which provide real-time data about profits/losses made. Setting a month to month budget will ensure success by keeping expenditure well managed at all times, despite the season and changing market conditions, while ensuring profitability stays consistent.
Revenue Forecasting
Understanding the relationship between key factors and how they influence revenue is essential for creating reasonable financial projections and making strategic decisions concerning your restaurant’s growth.
Calculating seating capacity, average check value, daily guest numbers as well as analyzing historical data can assist a business owner in putting together a comprehensive forecast of expected revenues. Everything you will do as it relates to budgeting stems from how much money you estimate you will make. Error on the side of caution, not optimism, when forecasting revenue. Also, do you best to estimate how much your competitors are making as well as that will be an indicator of your earning potential.
Doing so will ensure long-term success by enabling you to make informed judgements that maximize potential profits for your business.
External Support and Partnerships
Strategic partnerships are the secret weapon of the best restaurateurs in the world. Seeking external assistance from trusted resources like accountants, designers, and suppliers can be beneficial for your restaurant’s growth. Such relationships will give you access to valuable expertise as well as resources which could make operations smoother, the design more aesthetically pleasing, and provide a reliable source of quality ingredients.
As I’ve mentioned many times before, local retailers, neighboring restaurants, local publications, and housing complexes can all be amazing resources for building awareness and driving traffic to your new restaurant.
Also, tech will play a key role in the success of your restaurant. By incorporating the best technological solutions for your concept, you give yourself a key strategic advantage. Your point-of-sale systems or reservation bookings system will not only streamline operations but it will supply you with the data you need to run your business efficiently.
Legal and Compliance Considerations
Few things can sideline the success of your restaurant like permitting and state regulations. In the business plan for your own restaurant, it is important to outline a concise overview of its legal considerations.
Seeking advice from local authorities and professional lawyers can help you understand which licenses and permits are necessary, as well as any regulations relevant to your location that must be complied with.
With these things in place, you will protect the reputation of your restaurant while mitigating risks posed by potential issues down the line. Allowing for a smoother to opening without fear of disruption due to non-compliance or legalities not being up-to-date, sets you on a successful path.
Summary
As we wrap up this extensive guide on creating a winning restaurant business plan, remember that this journey is a blend of passion, precision, and practicality. The insights and advice shared here are distilled from years of real-world experience, trials, and errors.
Your restaurant’s success story starts with a well-crafted plan, but it’s your unique vision and relentless dedication that will write the chapters. Stay committed, adaptable, and always ready to learn. The restaurant world is dynamic and challenging, but with the right plan and a resilient spirit, you’re well on your way to making your culinary dream a reality.
Frequently Asked Questions
What should be included in a restaurant plan?
Here’s an outline of the key elements that should be included in your plan:
Executive Summary:
Business Concept: A brief overview of your restaurant, including the type of cuisine, theme, and unique selling points.
Business Goals: Short and long-term objectives.
Mission Statement: The restaurant’s purpose and values.
Ownership Structure: Details about the owners and their roles.
Company Description:
Legal Structure: Whether it’s a sole proprietorship, partnership, LLC, etc. Location: Details about the restaurant’s location and why it was chosen. History: If it’s an existing business, include a brief history.
Market Analysis:
Industry Overview: Current trends and growth potential in the restaurant industry. Target Market: Characteristics of your intended customer base.
Competitive Analysis: Information about competitors, their strengths and weaknesses.
Marketing and Sales Strategy:
Marketing Plan: How you will attract and retain customers (advertising, promotions, social media, etc.).
Sales Strategy: Sales tactics and goals.
Pricing Strategy: Pricing of your menu items and how they compare to competitors.
Menu and Services:
Menu Description: A detailed description of the menu items.
Special Services: Catering, delivery, special events, etc.
Operations Plan:
Daily Operations: Hours of operation, number of employees, suppliers, etc.
Management Team: Background of key management personnel.
Staffing Needs: Types and number of staff required.
Financial Analysis:
Startup Costs: Detailed breakdown of startup expenses.
Revenue Projections: Forecasted income for the first few years.
Break-Even Analysis: When the business will become profitable.
Funding: Sources of capital and funding requirements.
Risk Analysis:
Potential Risks: Identifying possible challenges and how they will be mitigated.
Contingency Plans: Steps to address unforeseen circumstances.
Appendices:
Supporting Documents: Resumes of key personnel, legal documents, detailed financial projections, market research data, etc.
Determine your business model as well as who you’re targeting with that concept, including a sample menu, menus and market research.
How do I prepare for a restaurant business?
When starting a restaurant, create a comprehensive strategy including the concept and various aspects such as finance, menu design, interior/exterior layout. Research suitable funding options for your venture and find an optimal site before ordering equipment or hiring qualified personnel to help you bring it all together.
Once these steps are taken care of, there is nothing left but executing what was put in place on paper beforehand – that being said plan carefully with regards to investments: be wise when formulating your restaurant business plan template!
How can I forecast revenue for my restaurant?
To accurately project finances, it is important to determine seating capacity and the average guest check value as well as how many guests you can expect daily.
What legal and compliance considerations should I be aware of when opening a restaurant?
To ensure that all operations can run smoothly and meet the local requirements for protection, make sure your restaurant has its proper structure in place as well as any relevant licenses or permits required.
Misite Boulton has had the inside track on our industry for years. As a consultant and secret shopping agency, she’s seen the best and worst that our industry has to offer. Her vantagepoint also gives her the ability to see trendlines in our industry that wouldn’t be readily obvious without such a large client base. Today we sit down to discuss how this industry is evolving and the things we can do in our restaurants today to ensure we evolve with it.
Full Comp is brought to you by Yelp for Restaurants: In July 2020, a few hundred employees formed Yelp for Restaurants. Our goal is to build tools that help restaurateurs do more with limited time.
We have a lot more content coming your way! Be sure to check out our other content:
All anyone wants to talk about today is AI and the way that it’s going to change our industry in the future, but I find it nearly impossible to see how it’s impacting day to day operations today. That’s why I called my friend and fellow restaurateur Dave Dittenber to discuss his latest project MABEL. MABEL is the assistant we deserve and that we’ve all wished we could have. In our conversation, Dave discusses how MABEL is changing the game for operators today and the roadmap for how he intends to transform our industry tomorrow.
For more information on Dave, BYOD, and MABEL, visit https://byod.ai/.
Full Comp is brought to you by Yelp for Restaurants: In July 2020, a few hundred employees formed Yelp for Restaurants. Our goal is to build tools that help restaurateurs do more with limited time.
We have a lot more content coming your way! Be sure to check out our other content:
There’s this old curse I remember hearing when I was younger, “May you get what you wish for.” What if you do get it all…the locations, the accolades, the attention and it’s not all it’s cracked up to be? Then what? Today we sit down with celebrity chef and restaurateur Jonathon Sawyer to discuss what happens when our dreams become reality. He shares the path that led to his success, his potential demise, and the new path he’s set for the future.
Full Comp is brought to you by Yelp for Restaurants: In July 2020, a few hundred employees formed Yelp for Restaurants. Our goal is to build tools that help restaurateurs do more with limited time.
We have a lot more content coming your way! Be sure to check out our other content:
Aspiring restaurateurs looking to take their culinary dreams from concept to success can tap into the expertise of the best Restaurant Consultants around. The same is true of seasoned professionals looking for expert guidance in taking their restaurants to the next level.
In this guide, we’ll uncover how these industry pros can help you build a thriving business leveraging the best tactics, tools, and strategies around menu planning, restaurant marketing, and optimization of operations.
Key Takeaways From Our Restaurant Consulting Guide
Key considerations in hiring the right restaurant consultant for your business.
Assessing experience, expertise & areas of specialization when selecting a consultant.
Evaluating testimonials, references & portfolios before investing in success.
The role of a Restaurant consultant is to analyze the core operations and marketing strategy in a restaurant business, supplying solutions that help owners reach peak performance when it comes to menu design, financial planning, hospitality training, revenue generation and more.
With their professional advice and direction, these experts can aid restaurants targeting customers, whether fine dining or fast-casual, to achieve success in today’s competitive market. Also, Check Out Our 15 Unique Concepts of Restaurant Ideas.
When debating the expense associated with hiring such professionals or consulting firm, keep in mind that you’re going to pay either way: either with time or money…and sometimes with both.
Consulting is a fast track, providing an outside view of the best practices of running a successful restaurant: maximizing profitability, generating awareness that leads to new customers, and providing engaging strategies for encouraging existing customers to return.
A restaurant consultant can be the answer to streamlining operations. Remember the old phrase, “What gets measured, gets improved?”
The best consultants have the benefit of pulling the best practices from the countless restaurants they’ve worked with in the past paired with key insight from your restaurant operation. They do research like reading reviews and talking with employees, so they’re able to identify any operational problems that need improvement.
They’re tackling foundational issues like food waste, theft, non-compliance, inventory management, labor management, and more.
Menu Development and Optimization
Some restaurant consultants are master chefs or work closely with culinary experts, improving menus by streamlining the offering, optimizing the production of the food, and ensuring product/market fit. Whether launching new restaurant concepts or refreshing an existing one, their expertise can create enticing and efficient menus that will keep customers coming back for more.
Not only do they offer tantalizing recipes, but they also provide advanced solutions sources from larger restaurant chains. This helps smaller independent restaurants and mid-market brands with operations development, menu design and financial planning to excel within this fiercely competitive food service industry.
Partnering up with consulting firms grants access to cutting-edge advice along with insight into the bleeding-edge technologies being developed today, providing the proven practices developed over decades with the tech tools of tomorrow.
Financial Planning and Analysis
The restaurant industry is a gam of pennies. When it comes to money, restaurant consultants are key in helping restaurants maximize profitability. From budgeting and food service oversight to risk management, they can support owners and operators with tackling complex monetary operations and guarantee that dining establishments remain on track.
How does this work? Through utilizing proven cost control tactics, pricing strategies, service models as well as ensuring that the revenues earned are utilized in the most efficient ways possible. It begins with a fiscal assessment requiring a deep dive into how you make money and how you’re currently spending it.
Types of Restaurant Consultants
There are a few different types of restaurant consultants but they can all be lumped into two categories: consultants that make you money and consultations that save you money.
Within those two larger categories are the following areas of expertise:
Knowing how these restaurant professionals can benefit your restaurant is key to success. Whether it’s reorganizing business operations, improving marketing strategies, or implementing fresh ideas on cuisine – there’s certainly an expert out there who will have just what you need!
So it’s critical that you’re clear on the goals you’re looking to achieve so that you can hire the right person for the job.
Business Consultants
For the restaurant industry, business consultants provide the expertise needed to build successful restaurants from scratch but can also step in to improve existing restaurants. Using tools such as menu development, supply chain management as well as concept design and finance solutions.
Working with these professionals enables businesses to implement proven methods that streamline processes while optimizing inventory. In an industry that requires owners and operators to be great at so many different things, they are an invaluable resource.
Restaurant Marketing Consultants
Engaging the services of a restaurant marketing consultant is an invaluable weapon for your arsenal, one which will help to significantly raise revenues and drive guests into your business. These specialists take a holistic view, ensuring that all aspects of your marketing strategy are in place, thereby providing you with a competitive edge over other restaurants in town.
Expert consultants provide comprehensive advice regarding new customer acquisition, increasing customer frequency, and differentiating your brand in today’s competitive restaurant landscape.
Everything from market research to four-walls-marketing, to social media and email strategy as all included in their scope of work. This serves to not only create awareness but to also inspire existing customers to come back.
Beverage Consultants
Having the right consultant for your beverage program can be a game-changer in achieving success within the hospitality industry. This is where your greatest profit margin lies.
From creating diverse and tempting drink menus to understanding current trends and managing inventory – these experts have what it takes to transform any bar or restaurant’s beverage offerings.
In addition to menu development, consultants provide staff training enabling bartenders with the necessary skills needed to provide guests top notch service while making high-caliber cocktails.
Food Consultants
Food consultants are essential experts at creating a successful restaurant menu that delivers high-quality dishes that are cost-effective. They can provide key advice regarding menu development, ingredient sourcing, pricing strategies as well as quality control and operations management to maximize profitability.
Menu design is as much a science as it is an art. By helping their clients make informed decisions on the construction of their menus, these experts ensure a frictionless customer experience, product/market fit and a highly profitable restaurant.
Benefits of Hiring a Restaurant Consultant
Hiring a restaurant consultant is not an expense, it’s an investment in the future of your business. For that to be the case, there must be a return on that investment. Restaurant consultants should make you money, not cost you money.
The resulting benefits should be more money, more time, and more freedom for the restaurant owner.
New Restaurant Launch
Nothing ensures success like starting off on the right foot. A consultant is a vital support system for a first-time restaurateur seeking to open a new restaurant and can offer help throughout its creation.
From creating your business plan, right through to the concept development of your menu, they provide knowledge and guidance for an optimized beginning journey leading to success.
The best restaurant consultants will provide key support when launching the venture, being onsite to assist with refining operations over time as well as strategies that relate to marketing. With their expertise present, you’ll avoid common mistakes, saving you time and money.
Operational Efficiency
A restaurant consultant can also offer support in establishing and streamlining the operations of your business. They identify any potential areas for improvement and help cut costs by streamlining processes throughout the restaurant.
Consultants can also help with the hard decisions, tackling operational difficulties head-on so that restaurants have all their needs addressed promptly. Issues related specifically to staffing management or financial control could also benefit, managing today’s challenges and ensuring they don’t become an issue again down the line.
Staff Retention and Training
The success of a restaurant depends on the caliber and training of its team, and consultants can help with optimizing the onboarding, training, and retention processes within a restaurant. When evaluating operations, consultants can also tease out and help you understand any causes of staff turnover.
Consultants are an investment in both leadership and employee development, providing the tools and proven practices for crafting an optimistic workplace poised for continued growth for the business itself.
Restaurant owners’ consultant services make you money and save you money by offering strategies that empower your team to sell more, work more efficiently, and reduce the expense associated with preventable staff turnover.
How to Choose the Right Restaurant Consultant
When choosing a restaurant consultant, you’ll need to do some research in order to find the right fit. Assess your unique needs first then evaluate their credentials and expertise. Dive deep by reading testimonials from other customers and reaching out to past clients.
Take time when selecting one, and be super clear with your goals and expectations. Also, don’t hesitate to ask questions along the way, it can really make all the difference.
Assessing Experience and Expertise
When selecting a restaurant consultant, it is essential to evaluate their knowledge and experience. The most trusted restaurant consultants and have at least five years as a restaurant consulting firm, or have spent at least 15 years owning or operating restaurants.
Hone in on the specialties your business specifically needs, such as concept development, restaurant marketing, menu design, or staff training. Make sure there’s an alignment between what services a given consultant offers and those being sought by the restaurant itself (i.e., financial planning).
Evaluating Testimonials and References
When searching for a restaurant consultant, testimonials and references are essential. Look at the feedback of those with similar requirements to get a better understanding of service quality and the results obtained.
Also, evaluate the references provided carefully. Make sure they’re applicable alongside verifiable success stories. Reaching out directly is encouraged as this allows you to gain insights into customer experiences working side-by-side with the restaurant consultant cost is in question enabling you to decide if hiring them is right for your own restaurant’s needs or not.
Reviewing Portfolios and Case Studies
It’s important to review the consultant’s portfolio and case studies in order to gain a better understanding of their background and expertise. Consider if they have dealt with similar situations like yours that your restaurant is facing so you can be sure they are equipped for the job.
This information will give insight into their problem-solving approach, which should match up with what your vision is for your own business and endeavors.
The Cost of Restaurant Consulting
The cost of using restaurant consulting services depends on several factors such as location, experience, and specialization. Restaurant consultants offer varying fees depending on daily, weekly or monthly rates, so researching beforehand is important before making any commitments. There are also group coaching and on one models.
Investing in a consultant is an opportunity to fast forward the success of your restaurant. Regardless of whether there might seem like hefty costs involved initially, the potential gains are likely worth the investment made.
Summary
It’s not about working harder. I know you already work very, very hard. It’s about focus. It’s about working on the things that will actually make an impact in your business and, ultimately your life.
There’s an old quote that I love that states that every problem in the restaurant industry is a solved problem. Restaurants have been around for thousands of years and I assure you that whatever problem you’re facing, someone along the way has solved it.
Leverage the experience of a restaurant consultant to live the life you’ve truly dreamed of.
Frequently Asked Questions
What is the meaning of Restaurant Consultant?
A restaurant consultant is a professional in the hospitality industry who offers guidance and advice to help your restaurant reach success. They provide knowledge and strategies that will enhance operations, to ensure optimum achievement for the restaurant.
What are the benefits of hiring a Restaurant Consultant?
A restaurant consultant can be a useful asset in setting up the business, adjusting menu items and providing other strategic planning and marketing advice. They are industry experts who know how to get restaurants ready for success! Hiring one of these professionals can not only boost profitability but also optimize efficiency across the board. With their help, you will have all the necessary tools needed to take your restaurant from concept to completion.
What do Consulting services do?
Consulting services are offered across virtually all industries, providing businesses with advice and actionable strategies to help them enhance their operations or resolve complex issues. Their area of expertise spans from IT, finance, HR and supply chain management to business strategy, marketing and general management. Analysts review existing methods in place before outlining potential problems as well as solutions for an organization.
What are the main areas of focus for Restaurant Consultants?
Restaurant consultants work diligently to boost operational productivity, devise creative dishes and menus, plan efficiently financially and guarantee that personnel receive sufficient training as well as being retained.
What types of Restaurant Consultants are there?
Restaurants may choose to consult with a variety of experts who specialize in helping them manage their business, including beverage consultants and other types of restaurant professionals. These specialists can provide valuable assistance to help the eatery run efficiently.
What does growth look like for restaurants moving forward? From my vantage point, things are looking a lot different. Restaurateurs are getting savvy and dynamic mixing a variety of business models and few exemplify this more that Criag Blum. Johnny Doughnuts is brick and mortar and mobile. Retail and catering. And there’s much more on the horizon.
Today we chat with Craig about this dynamic restaurant model and how it evolves from here.
Full Comp brought to you by Yelp for Restaurants: In July 2020, a few hundred employees formed Yelp for Restaurants. Our goal is to build tools that help restaurateurs do more with limited time.
We have a lot more content coming your way! Be sure to check out our other shows:
LISTEN TO THIS EPISODE! I can think of few times in my life I’ve walked away from a conversation so fired up!
Today, we had the opportunity to chat with Chef Danielle Leoni, chef/owner of The Breadfruit & Rum Bar, who’s fighting for sustainability in both the food we eat and the industry at large. Chef Leoni has been a food fighter from the beginning. Her positions on responsible sourcing and a holistic approach to hospitality have garnered her attention from prominent organizations like the James Beard Foundation, but it’s the unique restaurant ideas she’s implementing that have brought her message to the masses.
Want to streamline your front-of-house operations and increase sales? Head over tohttp://restaurants.yelp.com/fullcomppodcastto claim your free page and learn more about these powerful tools for your business.
SHOW NOTES
Beginning in campaigning for the hospitality industry during Covid
Breadfruit and Rum Bar closed due to safety
Decided takeout model wasn’t suitable
Sent a letter to Governor with suggestions to help independent hospitality businesses
Over 1000 business owners signed the letter
Ideas put to the Governor
Stop all penalties for sales tax payments
24month payment plan for sales tax
Waive fees for liquor licenses – this was accepted
Moratorium on commercial evictions – this was accepted
Clear guidelines for reopening of hospitality businesses
No intentions of reopening soon
Covid has given us a lifetime opportunity
We shape our food system
Hospitality workers are not respected
Seen as having “jobs” and not careers
The “paid help”
Hospitality shouldn’t be valued any less than other industries
The cost of reopening
What is the cost of giving team member fair wages?
Raising prices
The restaurant has no value is customers won’t compensate
You can’t retire on a James Beard award
Profits are minimal
Most restaurants are treading water
Initiatives for change
Seafood sustainability
Equity for women
Health of the oceans
Getting funding for the disadvantaged
Everyone thinks it is really easy to be in the restaurant business
It is not our sole responsibility to fix the food system
Speak up for inequalities
Pick up the phone to politicians
Now is the best time to ask for systemic change
Goal for the future
To be seen as professionals and be paid equally and fairly
Advice for restaurateurs
Put thoughts and beliefs on paper
Allow patrons and other business owners to support
After 30 years with restaurant conglomerate Lettuce Entertain You, Geoff Alexander could teach a masterclass on building and scaling a restaurant brand. And that’s exactly what he’s done for us today. In this far reaching conversation we discuss the essential elements of leadership, how to build a brand from the ground up, turnaround strategies for struggling brands, and how to outsmart the competition.
Want to Grow Your Business Fast? Check Our Guide by Josh Kopel on Restaurant Marketing Strategies.
Full Comp is brought to you by Yelp for Restaurants: In July 2020, a few hundred employees formed Yelp for Restaurants. Our goal is to build tools that help restaurateurs do more with limited time.
We have a lot more content coming your way! Be sure to check out our other shows:
Leverage Digital Media to Drive Traffic to Your Restaurant
This free (and highly detailed) guide will outline how to tell your story in the most compelling way possible and how to share that story with the masses.
(Yep, even if you’re not a “tech” person!)
FREE DOWNLOAD
Lead Your Team Instead of Managing Them
This free (and highly detailed) guide will give you everything you need to know to build and lead a world class team from scratch, ensuring you work less and earn more. (Yep, even if you know nothing about leadership.)
FREE DOWNLOAD
Ready to Optimize, Manage and Grow Your Restaurant’s Profit Margin But Not Sure Where to Start?
This free (and highly detailed) cheat sheet will give you everything you need to know to set up your restaurant to maximize profitability. (Yep, even if you’re not a “business” person!)
