How to Maximize Restaurant Profit Margin
Any business that is in the foodservice industry understands how competitive this space is. So they continuously keep finding new good ways to improve the restaurant profit margin. If they don’t, they’ll either not be able to compete with pricing while preserving quality or their margins will be squeezed out. Either way, it’s not good.
What is Restaurant Profit Margin
Along with other parameters, the profit margin is the biggest key indicator of whether or not the restaurant will survive in the long run. So it’s crucial that every restaurant understands it precisely. In a simple definition, profit is the remaining money after deducting all expenses from gross revenue. Whereas profit margin is actually the percentage of profit in relation to revenue. Here is the equation to calculate the profit margin:
Profit Margin = Profit / Gross Revenue * 100
The whole game here is how to control costs, either operating or food costs.
How to Improve Restaurant Profit Margin
Below are some tips that will really help you improve your restaurant profit margin.
Reduce food cost
While it seems obvious, but it is really one of the most effective ways to improve restaurant profit margins. There are ways to get good prices from suppliers and each gives you a certain negotiation power.
First, go with bulks as suppliers always give good competitive prices if you buy in bulks. Second, if you are a small restaurant and can’t buy bulks, try allying with other restaurants. So this will give you the power to buy in bulks so you can get good prices. Third, if this does not work, many restaurants have found working directly with farmers and producers much more effective. The reason is that you get rid of the middle man that always tops up the costs. The downside here is supply security as one day the farmer might run out of products. To mitigate this, always have a backup plan in cases like that. One more fact, buying food from locals can notably cut the cost as there is the cost for the shipping.
No doubt, customers would not like insufficient food if they paid for it but for sure they are ok if more food is served. So your restaurant must be able to know the exact portion to serve, not too much and not too little. That helps you really control the food cost to maximize your restaurant profit margin.
One trick that can notably increase your sales is upselling new items to current customers. This, of course, requires you to train your waitstaff the techniques to use in order to succeed selling more items. The most important thing you always need to keep in mind is which items to upsell?. Always try to upsell the high margins items as they, for sure, can have significant differences. Doing so really helps with increasing the overall restaurant profit margin on the long run.
Have an Online Ordering System
It’s so obvious that every restaurant wants to increase sales as much as possible. Today, technology just has become so much advanced more accessible that it can create a whole online ordering system almost instantly. A good one will help you with selling and upselling because they’ll optimize the ordering process. Optimizing the ordering process is key when it comes to online sales as it requires fine-tuning every single step.
If your restaurant is looking for an online ordering system