How Can You Fix Your Restaurant Profitability?

Updated: Mar 12

What Effects Your Restaurant Profitability? High food costs cost restaurants business profitability than any other factors. Profit margin compasses the degree to which your business activity makes money. Profit margin matters because generally important because it is the starting point toward achieving a healthy net profit. Restaurant Profitability can come down to having a good leadership in charge.


Your Leadership Plays a Huge Part of Your Profitability and Here's Why.



Cost of Food

Restaurant success always comes down to how well do you understand your food cost. High food costs can cost restaurants business. Food costs usually make up around a third of menu prices. If we had to boil down how to reduce restaurant food costs into one phrase, it would be this: paying more attention.


As a business owner or manager, collectively, you must give yourself the time to think critically about how your restaurant is operating. If not, then you will be governed by your restaurant and not the other way around. By putting your operational analysis, a priority as part of your daily activities is the best way to adopt this mindset as a start.

  • Identify the top 5-10 products you buy and make a daily count of those key items

  • Educate your employees on when food should and shouldn’t be thrown away

  • Monitor your purchase orders over time

  • Set a food budget and track your purchases

  • Simplify your menu



Sales Margin

Profit margin compasses the degree to which your business activity makes money, essentially by dividing income by revenues. In a sense, the higher the number, the more profitable the business. Profit margin is the ratio of profit remaining from sales after all expenses have been paid. Business owner can calculate profit margin ratio by subtracting total expenses from total revenue, and then dividing this number by total expenses.


Profit margin at 10% is considered a healthy margin, and 20% is considered a high margin as a rule of thumb. Profit margin is important because, simply put, it shows how much of every revenue dollar is flowing to the bottom line. Profit margin matters because generally important because it is the starting point toward achieving a healthy net profit.


“As a Leader, Not Only You’re in Charging of Your Ship, You’re Also Responsible for Encouraging employees to think like the owner they inspire to be.” Chez Boodparset



Selling Price

Margins has a direct link to your business Cash Flow. Your gross profit margin also impacts your cash flow. Selling Price is one of the factors that effects your restaurant profitability. Setting selling price is essentially part of your Margin-Based Pricing Strategies in operating your business. Setting pricing defines the value that your product is worth for you to make and for your customers to use. In addition, your product pricing is important because it defines the value that makes it worth it for you to make and for your customers to use your product.




Leaderships

Strong company cultures have been linked to higher rates of productivity. As a manager, you ought to realize that the abso