For most restaurant owners, crunching the numbers can be a daunting task. A solid comprehension of financials, such as the average restaurant revenue, can shed light on success factors determining a business’s survival and growth in this sector. From Michelin-star establishments to local mom-and-pop diners, each restaurant has a unique tale to tell, and their stories are often captured in their balance sheets.
In this comprehensive guide, we dive deep into the world of restaurant revenue, unfolding its various components and understanding the average income a restaurant makes. Whether you’re a seasoned restaurateur, a budding entrepreneur, or an intrigued foodie, gaining insights into restaurant revenue can be an eye-opening journey.
We will explore factors affecting the average restaurant revenue, from location and concept to cuisine type and dining experience.
What is restaurant revenue?
Restaurant revenue, often referred to simply as sales by most restaurant owners, refers to the average restaurant income from its operations, primarily from selling food and beverages. It represents the gross income that the restaurant receives before any expenses are deducted.
Sources of restaurant revenue can include:
- Food and Beverage Sales: This is most restaurants’ primary revenue source. It involves all income generated from customers dining in, ordering takeout, or delivering food.
- Catering and Events: Some restaurants offer catering services for parties, corporate events, weddings, etc. The revenue from these services contributes to the overall restaurant revenue.
- Alcohol Sales: If the restaurant has a liquor license, sales of alcoholic beverages can be a significant source of revenue.
- Merchandise Sales: Some restaurants sell branded apparel, cooking tools, packaged food products, or cookbooks. The sales from these items also count toward the restaurant’s revenue.
- Other Services: If the restaurant offers additional services like cooking classes, venue rentals for private events, or paid parking, the income from these services also contributes to the total restaurant revenue.
While revenue provides an understanding of the total income generated, it is also crucial to consider expenses to get a clear picture of a restaurant’s profitability. Costs like rent, salaries, utilities, food and drink, maintenance, and marketing expenses are subtracted from the total revenue to calculate the net profit.
How is restaurant revenue calculated?
Total business revenue, or gross revenue, is the total amount generated by the restaurant sales by month of goods or services related to the company’s primary operations.
Here’s a step-by-step guide to calculating total restaurant business revenue:
- Determine the period: You need to decide whether you’re looking to calculate the average monthly revenue, or if you’re planning on tracking quarterly or annually.
- Identify all revenue streams: In addition to sales from primary goods or services, businesses may have multiple sources of revenue, such as investment income, sales of assets, or secondary products/services.
- Calculate the revenue from each stream: For goods or services, this generally involves multiplying the number of items sold by their selling price. Once you’ve calculated the income from each source, add them all together to calculate total business revenue.
Here’s the formula for calculating the average net profit for typical restaurant:
Total Restaurant Income = Food and Beverage Sales + Alcohol Sales + Delivery/Takeout Sales + Catering/Event Revenue + Merchandise Sales + Other Income
What Tools can be Used to Calculate the Average Restaurant Revenue?
Restaurants can utilize a variety of tools to calculate their average revenue. These can range from traditional methods like manual bookkeeping to more modern solutions like restaurant-specific software. Here are a few of the commonly used tools:
- Point of Sale (POS) Systems: Modern POS systems do more than just process payments; they also track sales and can generate detailed reports. They can show you how much you’ve made in a day, a week, a month, or any time frame you choose. They can also break down revenue by product, showing you what’s selling and what isn’t.
- Accounting Software: Accounting programs like QuickBooks or Xero can track income and expenses, making it easier to calculate average revenue. They can also integrate with POS systems for a more seamless accounting process.
- Spreadsheets: A well-organized Excel or Google Sheets spreadsheet may suffice for tracking revenue and expenses for smaller establishments. Spreadsheets can be customized to suit the specific needs of the business.
- Restaurant Management Software: There are software solutions that are designed specifically for the restaurant industry, like UpMenu. These tools often combine many features into one platform, including online ordering, inventory management, analytics & reporting, and restaurant CRM.
Remember, total business revenue is a gross figure. To get the net income or total restaurant profits, you must subtract all business expenses (like the cost of goods sold, wages, rent, utilities, restaurant taxes, etc.) from the total revenue.
What is the Average Revenue for a New Restaurant Under a Year Old?
The average revenue for a new restaurant under a year old can vary widely depending on numerous factors such as the restaurant’s size, location, type (fast food, fast-casual, fine dining, etc.), menu prices, operating hours, and more. Small fast-food or quick-service restaurants could generate a few hundred thousand dollars in revenue in their first year. On the other hand, larger full-service restaurants in popular locations might generate over a million dollars in revenue.
Based on Credibly’s averages, the average restaurant revenue for a business under 12 months old is $111,860.70, with an average income for the restaurant owner being $72,600. There are roughly 200,000 quick-service restaurants vs. about 34,000 full-service ones, representing a range of dining experiences.
Which Types of Restaurants Have the Highest Revenue Average?
Restaurant revenue can vary greatly depending on many factors, including the type of restaurant, location, pricing, and operating hours. Obviously the higher the number of average sales, the higher revenue, which makes restaurants profitable. But many businesses that go with the wrong business models tend to fall behind other restaurants when it comes to earning gross profit. Generally, the types of restaurants that have the potential for the highest average revenue include high-end, chain, themed, and franchise restaurants and those located in busy areas.
High-End or Fine Dining Restaurants
These establishments make more money by catering to an upscale clientele and can charge premium prices for their menu offerings. Fine dining restaurants often serve gourmet food, have an extensive wine and cocktail list, and offer superior service. However, it’s important to note that while they may generate significant revenue from high menu pricing, their operational costs and total expenses are also very high.
Unlike most standard restaurant establishments, the average restaurant sales for high-end businesses are often higher due to an established reputation for quality and exclusivity. This can generate high demand, allowing these restaurants to maintain high prices and consistent bookings.
Well-known chain restaurants, particularly fast food or quick-service restaurants (QSRs), can generate significant revenue due to their high sales volume. Chains like McDonald’s, Starbucks, or Chick-fil-A have the advantage of brand recognition, consistency and often have drive-thru or delivery options to boost sales.
Chain restaurants usually have many locations, often spread across multiple regions or countries, which allows them to serve a larger number of customers and thus generate significant total revenue. Additionally, they have standardized menus and operating procedures, enabling them to operate efficiently.
Restaurants that offer a unique or themed dining experience can also bring in high revenues. These could range from entertainment-focused establishments like Hard Rock Cafe or Rainforest Cafe to niche-themed restaurants that provide a distinctive dining experience.
Themed restaurants often offer a unique and immersive dining experience that differentiates them from typical restaurants. This can attract a wide range of customers, from locals to tourists, who are willing to pay a premium for this experience. Some businesses incorporate entertainment into the dining experience and even sell branded merchandise, which can be a significant source of yearly revenue.
Restaurants in Prime Locations
Regardless of their specific type of cuisine, a restaurant based in a high-traffic area such as city centers, tourist attractions, or shopping malls often generate high revenues. Many restaurants in prime locations are typically in areas with high foot traffic, such as city centers, shopping malls, or tourist areas, which helps to boost revenue significantly.
Restaurants in prime locations are more visible and easier to find, which can attract more customers. Additionally, these businesses can be found in affluent neighborhoods or areas with a high concentration of businesses. Customers in these areas may have higher disposable income and be willing to spend more on dining.
Buying a franchise from a well-known brand can lead to high revenue due to the brand’s established reputation and customer base. Examples include Subway, Domino’s Pizza, and KFC. Restaurant franchisees also benefit from the franchisor’s marketing and supply chain management support.
Franchised restaurants operate under a brand already known and trusted by consumers. This brand recognition can draw in customers, generating higher sales. These businesses also have higher profit margins because an established business model works. Many challenges associated with starting a restaurant from scratch, such as determining a good menu or effective operating procedures, are already solved.
- Revenue in restaurants is wider than dining-in sales. Other sources, like takeout and delivery orders, alcohol sales, catering services, merchandise sales, and venue hire, can significantly contribute to the overall revenue.
- Many factors can influence average restaurant revenue, including restaurant size, location, operating hours, type of restaurant (fast food, fine dining establishment, etc.), and pricing.
- Regularly reviewing and analyzing revenue data helps spot trends, predict future revenue, manage cash flow effectively, and strategize for business growth.
- While revenue indicates the total amount of money generated, it’s not the same as profit. To calculate net profit, one must subtract all the operational costs, such as food and beverage costs, labor, rent, utilities, and other overheads, from the total revenue.
Frequently Asked Questions (FAQ)
However, to give you a hypothetical example, let’s consider a local, independently-owned, full-service restaurant.
- Each customer spends $20 on average, and the restaurant serves 100 customers per day.
- This would mean that the restaurant generates $2,000 per day in sales ($20/customer * 100 customers/day).
- If the restaurant is open 6 days a week, this will result in weekly sales of $12,000 ($2,000/day * 6 days/week).
- Over an entire year, assuming the restaurant is open 52 weeks a year, this would result in annual sales of $624,000 ($12,000/week * 52 weeks/year).
Remember that profit margins in the restaurant industry can be influenced by many factors, including the cost of ingredients, labor costs, rent or mortgage expenses, utilities, franchise fees (if applicable), and marketing costs. Moreover, variations can occur based on geographic location, the specific brand or franchise, menu prices, and the management efficiency of the restaurant.
A healthy profit margin can vary significantly based on the type of restaurant, its location, and many other factors. A typical profit margin for a restaurant might fall within the following ranges:
- Fast Food Restaurants: 2% to 6%
- Casual Dining Restaurants: 3% to 5%
- Fine Dining Restaurants: 6% to 10%
Remember, these are the average revenue of a restaurant, and successful businesses can sometimes achieve higher margins. Also, these numbers represent the net profit margin, which is the amount left after all expenses (including ingredients, labor, rent, utilities, taxes, and more) have been subtracted from the restaurant’s total revenue.
The numbers can be significantly higher for restaurant chains due to the revenue from multiple locations. For example, the average McDonald’s restaurant in the US was estimated to generate around $2.7 million in sales per year as of 2019, according to Statista.
This is a rough estimate, and actual average restaurant revenues can vary widely. It’s also important to remember that these figures represent gross revenue, not profit. Restaurants have significant operating costs, and the profit margin (the revenue percentage after all expenses are accounted for) in the restaurant industry is typically relatively low.
- Fast-food restaurants: $500 to $5,000 per day.
- Casual dining restaurants: $1,000 to $10,000 per day.
- Fine dining restaurants: $5,000 to $20,000+ per day.
The average restaurant sales per day can vary widely depending on several factors, including the type of restaurant, its location, its size, the quality of its food and service, the day of the week, the time of year, and more. There is no one-size-fits-all answer to this question.
Fast-food restaurants, casual dining establishments, and fine dining restaurants will have vastly different average daily revenues. Additionally, restaurants in busy urban areas might generate more revenue than those in smaller towns or rural areas.
Keep in mind that these are just general estimates, and the actual revenue can vary significantly. Restaurants also experience fluctuations based on factors like holidays, special events, economic conditions, and changing customer preferences.
The average restaurant profit per month can vary significantly based on factors such as the type of restaurant, its location, its size, expenses, and overall financial management. Profit margins in the restaurant industry can be quite slim due to high operating costs like labor, rent, food, and utilities.
A general guideline for restaurant profit margins is around 3-5% of total revenue. However, this can vary widely. Fine dining restaurants might have higher profit margins, while fast-food or casual dining establishments might have lower margins.
Here’s an estimate:
- Low-end: 1-3% of total revenue
- Mid-range: 4-7% of total revenue
- High-end/fine dining: 8-15% of total revenue
Keep in mind that these estimates can change over time and can be influenced by economic conditions, competition, and other factors. It’s essential for restaurant owners to manage their expenses and operations to maintain profitability carefully. If you’re looking for the most up-to-date information, I recommend consulting industry reports or financial experts in the restaurant field.