Are you wondering how much money restaurant owners make? The good news is restaurant owners have the potential to earn a great salary.
Some restaurant owners work their salary into their business model so that they will get paid right away. Others pay themselves a percentage of the restaurant’s profitability once it starts creating a positive cash flow, which could take several years in some cases.
The amount restaurant owners earn typically depends on the success of their restaurant. According to the National Federation of Independent Business, the owners’ salary should be based on a percentage of profits over the previous 2 to 3 years. However, they advise against the theory of “what’s left over after all bills are paid is theirs to keep.” Instead, they advise that “most owners of profitable small businesses don’t take out more than 50 percent of profits for “themselves.”
What is the Average Profit Margin for a Restaurant?
According to Indeed.com, the states with the highest salaries for restaurant owners include:
Annual total sales volumes of other companies are often used as another benchmark, but actual profitability may have little to do with total sales. The profitability of the restaurant depends on how well the restaurant owner manages specific expenses, such as food and labor.
To drive more profits and make more money as a restaurant owner, follow these tips:
Customized forecasting based on historical data helps you improve restaurant operations by reducing food costs over time. Using past sales data—customized by location and period—to predict upcoming sales helps managers make better inventory decisions and smarter prep quantities, creating less food waste and optimizing labor costs.
Restaurant inventory management monitors what ingredients come into your restaurant, what ingredients are used, and what is left over. Inventory tracking is an essential restaurant task—with more efficient food, beverage, and supply orders, you are saving money and adding to your bottom line. Accounting for potential areas of inventory loss such as server errors, kitchen waste, or incorrect preparation can be time-consuming, but necessary.
Cost of goods sold (CoGS) represents the total cost of all food and beverage ingredients used in your restaurant over a particular period. Reviewing CoGS daily gives managers the ability to spot rising costs and better plan for the upcoming days by ensuring the kitchen doesn’t overorder any ingredient that may be wasted.
Recipe costing breaks down the cost details of menu items to portion size and individual ingredients, calculated to the penny. Tracking each recipe cost can help you optimize food usage and reduce food waste over time. With trends broken down by menu item or location, you can use recipe costing to save money by reducing incorrect portions, improper staff training, or employee theft.
Menu engineering helps you control food costs by helping you maximize the profitability of your menu items. By seeing what items are underpriced or overpriced, you can make food cost decisions about revising recipes or ingredients.
For instance, if you are selling a large quantity of a low-margin item, which increases your food cost percentage, you can adjust either raise the menu price or adjust portion sizes. Menu engineering also enables you to seize menu opportunities, like promoting a menu item that is high margin but low sales. Understanding the balance of menu item popularity and profits enables data-driven decisions that lower the cost of food.
Tracking the difference between your theoretical and actual food costs allows you to make impactful changes to your food cost and bottom line. Theoretical food cost is what your food costs should be, given the current cost of all ingredients, over a period of time. Actual food cost is the real amount that a restaurant spent on ingredients over the same period of time. The difference between these two numbers accounts for imperfect portion sizes, improper invoicing, kitchen waste, or employee theft.
Tracking the actual vs. theoretical food cost variance shows you critical information about leaks in your profit margin. Tracking this variance daily can help you spot anomalies and adjust before variances become issues that affect your bottom line.
One of the most direct ways to reduce food costs is to avoid purchasing what you don’t need. With data-driven ordering, informed by historical and forecasted sales and inventory data, you and your managers are better able to purchase inventory at the right level to reduce order waste.
Vendor-side changes or errors in ordering and invoicing can be difficult to catch and fix, but they can affect your food cost percentage. By running automated receiving reports, you can keep an eye on vendor pricing and flag items outside of a contracted price for a specified data range, ensuring that you’re being billed at the quoted price.
Almost every expense can be controlled at some level. Even the smallest savings add up to make a difference to your bottom line and your paycheck.
If your restaurant business is focused on long-term profitability, equip your team with tools that will help increase operational efficiency. Restaurant365 is an all-in-one restaurant management system incorporating restaurant accounting software, restaurant operations software, inventory management software, payroll + HR software, and scheduling software into a cloud-based platform that’s fully integrated with your POS system, as well as to your food and beverage vendors, and bank.
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