Proven Tips to Increase Restaurant Revenue and Profitability

As a restaurant owner, it’s easy to lose sleep over your bottom line. Optimizing your restaurant revenue and potential earnings is a delicate balance between the sales you bring in and your expenses. Want to know how to influence profitability? Let’s dive into restaurant revenue and some key takeaways that you can implement for business success.

What is the Average Revenue for a Restaurant?

If you own a restaurant already or are thinking of opening one, you might be asking how much revenue and profit you can expect. Individual restaurant revenues can vary significantly based on various factors, including location, size, cuisine type, price point, concept, and how long a restaurant has been in the market. The overhead costs of your restaurant business and how thin your profit margins are can certainly affect your profitability.

According the the National Restaurant Association, restaurant sales are forecasted to top $1 trillion for the first time in history. While sales are expected to be up, keep in mind that your profitability does pose some challenges due to labor costs and inventory expenses. For reference, many industry sources share that an average restaurant has a profit margin of about 7% but recognize yours can fall anywhere between 0-12%. Read on for tips to leverage high sales to turn more profit.

1. Understand the Margins: Gross and Net

Regular analysis and optimization of both gross and net profit margins can help you make informed decisions, streamline operations, and ultimately drive profitability. It’s essential to strike a balance between maintaining a healthy gross profit margin and maximizing your net profit margin.

Gross Profit Margin: The gross profit margin is a crucial metric. It represents the revenue remaining after deducting the direct costs associated with producing your menu items. It is calculated by subtracting the cost of goods sold (CoGS), which encompasses the expenses for ingredients and other raw materials used in food preparation, from the total revenue generated through sales. This number provides valuable insights into the efficiency of your restaurant’s operations and the profitability of your menu offerings. However, it’s important to note that the gross profit margin does not account for other operating expenses, such as labor costs, utilities, and rent.

Net Profit Margin: While the gross profit margin offers a glimpse into operational efficiency, the net profit margin provides a comprehensive understanding of your restaurant’s overall profitability. This metric is derived by dividing your net income, the total revenue minus all operating expenses, including the cost of goods sold, payroll, taxes, maintenance, rent, and other overhead costs, by your total sales. The net profit margin considers the complete financial picture. This allows you to evaluate the percentage of profit earned for every dollar of revenue generated after accounting for all expenses associated with running your restaurant. By closely monitoring and optimizing your net profit margin, you can gain valuable insights into your business’s long-term sustainability and growth potential.

2. Diversify Your Restaurant Revenue Streams

Most restaurants rely on multiple revenue streams to drive their overall income and profitability. As you think about your business, consider combining these sources that can bring in revenue and create a well-rounded and resilient business model.

• Food and Beverage Sales: Undoubtedly the primary revenue driver for most restaurants, this encompasses all income generated from patrons dining in, ordering takeout or delivery, and purchasing food and beverages on-site. It includes sales from the restaurant’s core menu offerings, as well as any daily specials or seasonal menu items.
• Catering and Event Services: Many restaurants capitalize on their culinary expertise by offering catering services for private gatherings, corporate functions, weddings, and other special events. This revenue stream not only generates additional income but also serves as an effective marketing tool, introducing the restaurant’s offerings to new potential customers.
• Alcoholic Beverage Sales: For establishments with a liquor license, alcoholic beverages, including beer, wine, and spirits, can contribute significantly to overall revenue. Well-curated beverage programs and creative cocktail menus can elevate the dining experience and drive higher spending per guest.
• Retail and Merchandise Sales: Savvy restaurants often leverage brand recognition by offering branded merchandise, such as apparel, kitchenware, or packaged food products. These items generate additional revenue and serve as marketing tools, fostering customer loyalty and brand awareness.
• Ancillary Services: To diversify their revenue streams, some restaurants offer complementary or ticketed events and services like cooking classes, venue rentals for private events, or even paid parking facilities. By capitalizing on their existing infrastructure and expertise, these services can generate supplementary income while enhancing the overall customer experience.
• Sponsorships and Partnerships: Strategic partnerships with local businesses, brands, or organizations can provide additional revenue opportunities through sponsorships, co-branded promotions, or collaborative events.

3. Get a Handle on Overhead and Inventory

Controlling overhead expenses has become absolutely critical for restaurants to maintain profitability. The combination of inflation, supply chain disruptions, and evolving consumer behaviors has created a perfect storm of rising costs that can quickly eat into profit margins.

Conduct a comprehensive audit of all overhead line items and look for areas to streamline costs without compromising quality or the guest experience. Labor will likely be one of the biggest overhead culprits – make sure you have the right scheduling tools and processes to precisely match labor needs to operating hours and demand. Renegotiate vendor contracts where possible and find ways to reduce food waste. Look into energy-saving equipment upgrades that can pay back in lower utility bills. And leverage technology to reduce administrative overhead through automation.

Effective restaurant inventory management involves meticulously tracking and monitoring the flow of ingredients from procurement all the wat to consumption. It entails a comprehensive understanding of what ingredients are received, how they are utilized in preparation, and what remains in stock. This process is a critical task for any restaurant operation, as efficient inventory management directly impacts profitability by optimizing food, beverage, and supply orders, ultimately minimizing waste and maximizing cost savings.

While inventory tracking can be time-consuming, it is an essential investment to account for potential areas of inventory loss. These losses can stem from various sources, including server errors, kitchen waste, or incorrect preparation techniques. Identifying and addressing these leakages is crucial to maintaining control over your inventory and safeguarding your bottom line.

4. Strategically Staff to Bring in Revenue

Proper staffing is crucial for driving restaurant profitability. Labor is typically one of the biggest line items on the budget, so getting staffing levels right is absolutely essential. Too many employees on the floor and your labor costs skyrocket. Too few, and you risk providing poor service that drives guests away. And in these times, staffing still is proving to be difficult.

Take a systematic approach to staffing using all the data and forecasting tools at your disposal. Analyze historical sales data, seasonal patterns, and any upcoming promotions or events to predict demand as accurately as possible. From there, build an staffing model that aligns labor levels with predicted demands and service needs throughout each shift. Use scheduled hours judiciously – staff up during peak periods and scale back during slower times. Cross-train employees to be flexible across multiple roles and stations.

Don’t fall into the trap of overstaffing “just in case” or cutting too lean. Maintain a qualified pool of on-call staff you can tap into for busy shifts or call-outs. But avoid over-reliance on overtime or excessive part-time staff which can strain budgets. Be proactive about anticipating vacancies and hiring needs as well. By taking a data-driven staffing approach, you can optimize your labor spend, deliver great service, and protect profits.

5. Leverage Advanced Restaurant Technology

Embracing cutting-edge restaurant technology can be a game-changer in streamlining operations, controlling costs, and enhancing guest experiences. For instance, advanced scheduling software powered by predictive analytics and sales forecasting can help optimize labor hours while aligning with predetermined labor cost targets. Such solutions not only save time and effort but also boost employee engagement by enabling seamless shift management and company-wide communication through mobile apps.

Furthermore, a fully integrated point-of-sale (POS) system, coupled with restaurant-specific accounting software and robust reporting tools, can provide invaluable insights into business performance. These tools empower your management team with real-time data and analytics, enabling informed decision-making and operational adjustments. Inventory management systems and actual vs. theoretical reporting can help minimize food waste and reduce overall food costs, ultimately improving profitability. Event management platforms, like Tripleseat, can add new revenue opportunities with features to drive revenue with large parties, private dining, events, and catering.

Gain Restaurant Revenue With the Right Solution

Tripleseat’s event management software features help drive more sales, impress customers, and grow your events business in a way that’s manageable and profitable. Schedule a demo at a time and date that works for you to learn more about how Tripleseat can help you build and streamline your events and private dining business.