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The Average Profit margin measures the amount that you make after having deducted all the costs for production. Currently restaurants are experiencing anywhere between 3% to 6% profit margin which is quite low compared to other industries. A restaurant profit margin is an essential measure for any business to track in order to understand where and how to increase profitability.
What is the Average Profit Margin for Restaurants?
Profit margins are important for any business, but they’re especially important to keep track of if you’re in the restaurant business. That’s because the restaurant industry is notorious for thin margins. On average, a restaurant can expect a profit margin of 3% to 6% overall.
Keep in mind that the average is just an average. Some restaurants, particularly ones that rely on high-margin products like alcohol or high-end dining can have margins as high as 15%. However, you can’t rely on that and it’s difficult to hit that number when you’re getting started. Others see lower margins or even lose money.
What is a Restaurant Profit Margin?
Restaurant profit margin compares the amount of money that a business earns to the amount that it spends. It’s expressed as a percentage. The percentage indicates what percentage of revenue ultimately becomes profit.
For example, if your restaurant has a profit margin of 6%, then you earn $6 of profit for every $100 that your business brings in. The remaining 94% of revenue goes toward covering operating costs, such as paying employees, buying supplies, and financing restaurant equipment. You will want to give thought to your potential restaurant profit margin when considering how to open a restaurant.
Average Restaurant Profit Margins by Type
Different types of restaurants work differently, so you can expect different margins depending on which type of business you open.
Full-Service Restaurant Profit Margins
Full-service restaurants are the typical sit-down restaurant. Customers visit, sit at a table, order food from a waiter or waitress, and wait for it to arrive. These restaurants can be simple family-style locations or high-end, fine dining establishments. The average full-service restaurant sees margins of 3% to 5%.
Fast Food Restaurant Profit Margins
Fast food restaurants are less fancy than full-service ones. Customers usually order food from a counter and take it to go or sit down to eat in a small eating area.
Fast food restaurant margins average 6% to 9%.
Food Truck Profit Margins
Food trucks let you travel to where the customers are and offer small menus of food that’s easy to eat while out and about. They don’t require a large physical location or lots of staff, letting you avoid a lot of overhead.
The average food truck profit margin ranges from 6% to 9%.
Catering Profit Margins
Catering services provide meals at events such as weddings, parties, or community organization meetings. Their average profit margins range from 7% to 8%.
How to Improve Your Restaurant’s Profit Margin
