Owning a restaurant can be very rewarding. You get to create dishes that are close to your heart and receive thanks from clients who enjoyed your food. But it can also be very stressful. After all, your success depends on how much profit you make at the end of each month.
If you want to own a renowned business that will pass the test of time, you must find ways to increase your restaurant’s profitability.
In this article, you will find easy-to-follow steps to making more money at your restaurant.
How to Calculate Your Restaurant’s Profit
The first step to increasing restaurant profitability is to calculate the profit you are making. Check out these formulas that will make cost assessing a breeze:
- How to calculate gross profit: it is the ratio between the selling price of a dish compared to the ingredients and materials that went into preparing it (Cost of Goods Sold). Profitable restaurants usually make 70% gross profit. Choose a period and apply this formula:
Gross Profit Margin = (Total Sales – Cost of Goods Sold) / Total Sales x 100
- How to calculate net profit: this type of profit takes into account all operating costs such as utilities, salaries, and maintenance. The average net profit can be anywhere from 2% for full-service restaurants to 8% for catering businesses.
Net Profit Margin = (Total Sales – Total Expenses) / Total Sales x 100
Read more: How to Calculate and Boost Your Restaurant Profit Margin
7 Steps to Increase Restaurant Profitability
If you used the above formulas and were not happy with the results, you can follow the next steps to increase restaurant profitability in no time:
1. Let go of third-party delivery services
You have a limited number of seats at your restaurant, so offering delivery and pick-up services can significantly increase your profitability. Not to mention that most clients expect to be able to order your food from anywhere.
However, your restaurant’s profitability can be significantly affected by how you choose to handle your online ordering.
If you choose to go for third-party delivery services, you are practically throwing money away. You have to pay delivery charges & service charges and they may have many other hidden fees. All that money to have your restaurant get lost between many other similar businesses.
Read more: How to Remove Your Restaurant from Third-Party Food Delivery Apps
To increase profit, opt for your own online ordering system paired with your own fleet or a hire fleet. You get to be on top of all the processes while keeping the money.
We recommend the free online ordering system from GloriaFood that helps streamline your online ordering process and comes with additional features that help you gain visibility and more clients.
2. Turn your website into a beacon
It is a known fact that to increase restaurant profitability, you need a constant stream of new clients. What are you doing to attract them? The easiest solution is to rely on your website to get the word out about your amazing food.
But not any website will do the job. A website that isn’t intuitive and is not optimized will have the opposite effect. Not only will it be very hard to find, but if it can’t be easily browsed, people will click the X button immediately.
You need a sales and SEO-optimized website to get on the first page of Google where potential clients will find you when they search for your type of cuisine. When they visit, the website will guide them to your important information and especially to your menu.
That way, you build trust with people who see how easy it is to reach your restaurant’s menu and how intuitive your website is. Therefore, they will be tempted to press the order button when they are faced with mouth-watering pictures of your food.
3. Start menu engineering
Menu engineering can help increase restaurant profitability by combining menu design tips with menu psychology. With the right tactics, you can stimulate your clients’ appetite and encourage them to spend more.
Here are a few tips you must try:
- Keep it short: A long menu can give people decision paralysis. It also makes people wonder if you prize quality when you serve so many different dishes. Choose to focus on a limited number of dishes with a high-profit margin;
- Provide customization options: Did you know toppings are one of the most profitable menu items? They also make people happy because they can create the perfect dish for them. Therefore, choose a menu creator that allows customers to personalize their menu items;
- Make use of photography: while you may write tempting food descriptions, a picture can be more convincing. Consider hiring a professional photographer or learning more about food photography to put your dishes in the best light.
4. Decrease food costs
Two main costs influence your profit: food costs + operating costs. While many operating costs are fixed, you have some playroom with food costs that will allow you to increase restaurant profitability.
Check out these tips & tricks to lower your food costs:
- Renegotiate prices with food vendors: try to get your suppliers to sell you the wanted items for a smaller price. For example, you can extend your contract period for a decrease in prices. If that doesn’t work, you can shop around for vendors to see if there are better options out there;
- Use ingredients that are in season: local ingredients that are in season are cheaper than imported ones. Adapt your menu to match seasonality so you can make more profit;
- Control food portions: do customers constantly leave food on their plates? Then your serving sizes may be eating into your profit by using ingredients that get thrown out. Make your food portions smaller so clients can still sate their hunger while you make more money.
Read more: Restaurant Food Costs: How to Manage the Rising Inflation without Losing Customers
5. Minimize food waste
If your bins are always full of ingredients that went off before they were used, you are actively decreasing restaurant profitability. Here is what you can do to decrease food waste that is bad both for your wallet and the environment:
- Up your inventory game: take a testing period where you monitor how much you sell every day and every week. Afterward, only buy ingredients equivalent to the portions sold, so you are not left with a lot of perishable food;
- Make your stocking process more efficient: often, ingredients get stocked and forgotten. You need a better system in place. First, each item should be labeled with the date of opening and expiry. Afterward, stock ingredients in the fridge according to the expiry date. The ones who will go bad first should be at the front;
- Utilize promotions for end-of-shelf-life ingredients: when you notice you have a couple of items that are still good but are about to go bad soon, don’t forget about them. Come up with a few dishes you could use them in and sell them for a discount. Create a new category in your menu with specials to sell the reduced menu items.
6. Persuade clients to come back
The secret to increased restaurant profitability is to get more loyal clients who will constantly buy from you and increase your profit margins. Utilize these tips to convince people to come back to your restaurant:
- Use a loyalty program: while your food may be excellent, people often need more motivation to come back. For example, a loyalty program that gives them discounts for certain items or after a certain number of purchases;
- Implement an email marketing campaign: people check their email often. If they see a discount code for your restaurant when hungry, they will be tempted to take advantage of it; Use our online ordering system to set up email marketing the easy way:
- Offer a memorable dining and ordering experience: good food + great experience = new loyal client. Train your employees to create an amazing experience that customers want to come back to. You can also add a flyer with 5% off for the next order in each online order.
7. Reduce staff turnover
The bigger the operating costs, the lower the restaurant’s profitability rate. Constantly hiring new staff because the old team members quit will really drive up your operating costs.
Here is how you can retain great employees:
- Pay staff competitively: your staff shouldn’t rely on tips to make ends meet. Pay them well and offer them benefits and health insurance to motivate them to be productive;
- Ensure fair scheduling: a lot of problems in the restaurant start because employees are unhappy with the scheduling. Use a scheduling system to ensure staff get to work the hours they desire while your restaurant is constantly covered;
- Create a great workplace culture: a happy employee will have no reason to quit. Promote transparency so every decision is clear and keep an open channel of communication. Furthermore, organize hangouts to allow staff to bond and have fun.
Final Words
Your overall success depends on how much you can increase restaurant profitability. Try the tips presented above, but always put quality and experience first.
After all, you can’t make a profit if you don’t have many happy customers.