Average Restaurant Profit Margin for Independent Operators
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- Опубліковано 23 сер 2024
- Average Restaurant Profit Margin for Independent Operators - What do you think the average profit margin is for an independent restaurant? What if I told you that even in these challenging times, most restaurant owners are setting their sights too low? In this video, I'll explain what I mean and what you can expect if you follow systems.
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Welcome to my UA-cam Channel. I am David Scott Peters, a restaurant coach and speaker who teaches restaurant operators how to cut costs and increase profits with my trademark Restaurant Prosperity Formula. Known as THE expert in the restaurant industry, I apply my no-BS style to teach and motivate restaurant owners to take control of their businesses and finally realize their full potential. Thousands of restaurants have used my formula to transform their businesses. To learn more about me and my coaching program, visit www.davidscottp....
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Years ago, I remember the National Restaurant Association published that the average restaurant makes 5- 8% profit. That's a nickel on every dollar that comes in the door. Do you work as hard as you do for a nickel? I also always refer to a report issued by Ohio State University years back about a study that showed 62% of all restaurants fail in their first three years of business. The first three years of business!
Then there's prime cost, which is your total cost of goods sold plus your total labor costs, including taxes, benefits, insurance, also known as controllable expenses. Well, for years the guideline was that you should be shooting for 65%. Following this guideline, for every dollar that comes in the door, you're using $0.65 in people and product to deliver that product. This just perpetuates the lower profit margins.
What if I told you it's actually worse for most restaurant owners who don't take inventory values to calculate the cost of goods sold on a weekly basis and who don't budget for or track labor on a daily basis? Those restaurants run a 78% prime cost. With this kind of cost, you can see how it leads to that 62% failure rate.
Now what if I told you by implementing systems from budgeting to checklists my members have learned that a 15% profit margin is within reach? With some hard work and a willingness to hold their managers accountable to the systems they actually put in place, my members see time off, time to work from home, time to grow their businesses, and they experience higher profit margins.
One example of exactly this experience is my member, restaurant owner Brian. He attacked his menu and took steps to control his kitchen labor and went from a 65% prime cost to 55% prime cost. He's now making an 18.5% profit margin.
Or let's look at a lower volume restaurant. Patrick, with a low volume restaurant, attacked his labor cost and operating expenses to go from a 65% prime cost down to 54% prime cost. Now, he's only hitting a 9% profit margin, but this is the first time he's actually making money in his restaurant.
Another of my members attacked their menu and labor costs, and added management, and went from a 92% prime cost at the beginning of the pandemic to a 57% prime cost, which literally saved her business.
How about one more example? This time I want to give you the example in dollars. In 2020, this restaurant owner lost money on $3 million in revenue. She did a lot of hard work and finished 2021 with $3.7 million in revenue and a profit of over $626,000. That's a 17% profit margin.
This is why when someone asks me what the average restaurant profit margin is I reply that with budgeting, implementing systems and holding your management team accountable, you should be shooting for a 15-20% profit margin. Ignore the averages because your restaurant is not average.
The key with all of these restaurant owners is they took action. Their first action was to get on a free discovery call with me. The rest of it, as they say, is history.
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So this is a promotional video. No information here at all. Basically he said with my system you make more money.
Hey Elias - It's true. Restaurant owners who work with me, learning my systems, hold their team accountable and do the work make more money. I'm sorry you didn't get anything helpful from this video. Definitely check out more of my videos. I have them on many topics addressing the common problems in restaurants.
dont check any of this guys videos out he sucks
@@DavidScottPeters
Hey David ! Great video as usual ! I have a problem which I can’t find a proper solution of. Here’s the thing. Let’s say that during the service my Chef runs out of Cognac for his flambés and ask a bottle to the bar ( bottle that he will keep afterwards). How do I compute that regarding my bar cost/inventory and my food cost directly related to the kitchen ? Thanks a lot in advance !!
Hi David, i am new in the channel. I am thinking to buy an Iraqi restaurant. It makes about 2500$-3000$ a day (sales). The rent is 2900$ a month. 8000$ salaries. How much the profit will be?
Hi Ahmed - The only way to know what your profit will be is to do a budget. You can search my channel for lots of different videos about budgeting and prime cost. Thanks for watching!
how is he supposed to calculate your profitability if you give him incomplete information. you don't mention things such as insurance, depreciation and maintenance of assets ect. you can't figure out profitability until you have a full picture of expenses
should i buy a small business restaruant (non franchise) that has great food.? the owner doesn't market , or change the menu, or have good customer service and has been in operation for over 10 years. he wants 120k for it. What questions should i ask him before i purchase it? I plan to purchase it as is and make it my side hustle and keep the employees and manager
Hey @Dezcanso - it's all about the numbers and what the potential is to increase the numbers. If it's going to be your side hustle, it's very important to establish the systems you want followed. I recommend you watch this interview I did with a restaurant owner who bought a restaurant and left it to be run by the current staff ua-cam.com/video/r07aQj226L4/v-deo.html and then this interview with another restaurant owner who has a full-time job along with a family restaurant business ua-cam.com/video/a1Xef885zbw/v-deo.html. Both offer great insight into what went wrong and what they did to fix it. Listening to them can help you avoid the "what went wrong" part. You can also watch this video series I created: dsp.coach/restaurant-freedom
Wait in 2019 30% I got 28% profit now 2022 33% and I got 30.5% profit isn't that how it works. I dont have system of any kind but I want them and you have great info thank but seriously I'm confused
I'm confused too about this percentage % net profit 📈 I'll keep searching all over the web for an average net profit for Restaurants and I keep getting the same answer between 3 to 5% NET but everyone I know they're averaging a total NET profit of 18 to 26 % at the end of the year for example if the total sales are a Million dollar 💵 they're going home with a NET profit of $250K an average 🤔
I help the restaurant owners in my coaching group achieve at least 15-20% in profits. It's reached through systems, training, accountability and showing up as a leader in your restaurant.
That sounds like you may be profitable in spite of everything. It's possible - depending on your revenues - that you're leaving more money on the table because you don't have systems in place. I encourage you to get on a call with Ryan to talk about how you could benefit from being part of my coaching group: dsp.coach/book-a-call
@@DavidScottPeters i mean I've been doing this awhile and I think I see what you do now. So im going to assume ur including overhead and labor in to define your actual cost of an item not just COG's in ur percentages but if I did that I would be charging around 420 to 480% and would be priced out of business so not sure really how that math works out. Also never meet a restaurant owner that prices that way. Isn't it supposed to be 1 to pay for it, 1 to pay for everything else and 1 for me...... ya I pay $1 and get back $3 not $4 or am I way off here sorry first time I have heard this before?
@@DavidScottPeters so wait is this just basically getting at a business that is operating beyond there means more or less. Like to much labor and overhead and ultimately not enough sales to be within there 33% they have set aside for it and that number ends up taking more like 50 or 60% is that what you mean more or less by prime cost being inflated digging into the profit? And if so adjusting that could either price you out or have less labor. Which means you would still have to market more to fix it in the end or am I crazy? Honestly asking. Also if I did 380k and had 120k left at the end dosent that put me at the target of 33% that we want?