Boosting profits is every restaurant owner’s chief goal — but many struggle to understand where to start. Thankfully, it all becomes much simpler once you demystify the factors that influence profit margins.
In fact, there are many strategies you can use to increase your restaurant profit margins — and many are straightforward to implement. From reviewing your menu and ingredients to following up with staff training, there are plenty of variables to experiment with. If you’re looking to increase profits (and who isn’t?), these are the six areas you’ll want to take a closer look at.
Take a Second Look at Your Menu
Pricing a menu is a definite science: too low, and your food costs will eat up your restaurant profit margin; too high, and you’ll have customers heading for the hills. However, if food costs are cutting into your profits, it could be time to have another look. Generally, you want to keep food costs at an average 33% of the menu price, although some high-priced items, like steaks, may run higher. Keep in mind that food costs fluctuate pretty frequently, so it’s a wise idea to add some padding into your prices to absorb an unexpected price hike.
As you look at your menu prices, remember that there is a psychology to the way people buy. Your prices should reflect purchasing power in your area: low- to middle-income neighborhoods tend to favor high-value, low-cost meals, while upscale regions are more focused on quality ingredients and food trends.
The placement of each item counts too — placing an expensive, high-profit item next to an even more expensive, low-profit item will lead the customer to choose the former option. This technique is known as relative placement, and it can be used all over your menu to influence customer decision-making. It’s a sneaky way to increase your restaurant profit margins.
Review Your Recipes
It’s possible to increase profits without raising prices. Replacing a low-performing, high-cost meat dish with a satisfying pasta dish will certainly make a difference since pasta entrees average at just 15% food cost. Salads perform similarly well, although they may not be the best replacement for heartier entrees.
You may also want to look at the specific ingredients in each item. “Expensive” doesn’t always translate to “delicious”; there are many low-cost alternatives for high-dollar foods. For instance, salmon portions can easily be rotated out in favor of its less-expensive cousin trout. Preparations of chicken and duck livers work in place of pricey foie gras. And lumpfish roe is a convincing doppelganger for caviar. Get good at these kinds of swap-outs, and they could easily become your signature.
Implement Daily Specials
Daily specials are pure profit gold. They allow your chefs to flex their creative muscles while using up any excess product you have on hand. Since these are specials, you can charge more for them than other entrees without much resistance from customers.
The sky’s the limit for specials, as long as the recipe is relatively simple to follow — you don’t want to add a labor-intensive item to your cook staff’s ensemble. Look for entrees that can be prepped ahead of time, like barbeque pork or braised leg of lamb. But don’t be afraid to try out something unusual either — if an item becomes a hit, it may just be time to add it to your regular menu!
Upsell, Upsell, Upsell
Upselling is one of the most effective ways to raise profits without increasing your labor costs. It takes minimal effort on your staff’s part to prep a dessert or pour another glass of wine, but these high-yield items add up to big profits.
Ideally, your team members should be able to make suggestions that feel organic and authentic. Allow servers to sample items on your menu, so they have more information to work with when a customer asks what’s good. Help your staff understand the profitability of various entrees and which menu items make sense to suggest. Get team members excited about your food, and they could turn into regular menu evangelists!
Give Your Regulars Some Love
As a business owner, you probably already love your regulars. These familiar faces routinely spend their hard-earned cash at your establishment and may even act as unpaid advertising, encouraging their friends and neighbors to visit. However, there are some statistical reasons to cherish them too: according to the White House Office of Consumer Affairs, it’s six to seven times more expensive to attract a new customer than it is to retain an existing one.
The customary way to acknowledge regulars is by establishing a customer rewards program. However, there are other ways to show your thanks: invite these patrons to an exclusive event or give them early access to new wines or craft beers. After all, everyone likes to feel appreciated.
Focus on Service and Quality
At the end of the day, you can only raise prices so high. Cutting costs while cutting corners will only result in unhappy customers, which will ultimately hurt your bottom line. However, the opposite is also true: restaurant-goers who are satisfied with their experience are more likely to go ahead and order that second glass of wine.
In fact, in one American Express survey, 70% of surveyed consumers said they’d spend up to 13% more with businesses that deliver excellent customer service. If you do the math, that’s a potential 9% sales bump.
If you’re not sure how you can improve customer service, use diner comment cards to identify areas that need work. Cover your bases by ensuring that your team is trained to handle and respond to problems and that they know your menu back-to-front. A knowledgeable server is a helpful server.
Follow these suggestions, and next year your biggest worry will be where to invest those profits!