Average Restaurant Profit Margin - YouTube

Have you ever wondered what the average profit margins are in restaurants?

Like where or how much you're supposed to spend in certain categories?

It's hard to find that information. I'm going to break it down for you right now.

Hey, everybody. Ryan Gromfin – author, speaker, chef, restaurateur,

and founder of the Restaurant boss.com,

and as well as Clickbacon.com

And I'm really excited

to talk to you about kind of the averages and restaurants, right?

Profit,how much you should spend on rent,

all that stuff we're going to cover it right now.

However, before I do that,

I want to share with you this really cool thing that's called Guardian Drain Lock.

I've never promoted a product on my channel before this product.

People send me stuff all the time.

I absolutely love this product.

1) I want to let you know that

we're going to be giving away some of these for your restaurants.

So if you want to win some of these,

first thing you got to do is you got to subscribe to our channel.

You have to be a subscriber on our channel to win.

We're going to check once we randomly pick a winner to make sure you're

a subscriber. So, if you haven't yet subscribed,

but then below this video either in the comment

section or if you're watching it on our website,

there's going to be a link to take you to a page

where you can register to win if you want some of these.

We think we're giving away five of them,

but whatever shape, whatever size you need.

But here's what I love about this product.

Whether you win or not, you should buy some on Amazon.

Again, the link is going to be below here,

but it's called Guardian Drain Lock, it's super well-built.

The guy sent me a bunch of them.

His name's Jon Ham. Super cool product,

and what it does is it replaces that

flimsy little drain cover that you have right now

on all the drains in your restaurant,

whether it be in a floor sink or on the floor,

so that way people can't like shove stuff down the drain, right?

Sometimes we lift that dome off, we shove things down.

You get expensive repair bills, your drain stinks, you get fruit flies, etc., etc.

Once you put these on here, your employees can't remove them.

You can remove them with a special key or a special screwdriver bit,

but only when you need to.

So, Guardian Drain Lock, they're awesome.

He's got some great videos, check it out on the on his website,

or to buy these products, you go to Amazon,

but you're better off just clicking on the link that we provide for you.

Alright, so let's talk about the profits in your restaurant,

right? So, I've got some notes just so I don't screw this up,

even though I talk about this like every day.

I just want to make sure I get it right for you this time,

but the average profit margin in a restaurant

is a lot lower than people think.

You know, it's hard to say. Everyone publishes different statistics.

In general though, what I see from the people that I work with,

it ranges anywhere from about 15% to obviously nothing,

but on average, I'd say that most restaurants are

profiting about 5-6% of total sales,

which is pretty bad, but again,

it's really hard to tell because some people pay themselves a salary,

some people don't, so that's going to throw off profits,

but let's just look at kind of where the makeup of your restaurant should be.

First thing, all these numbers are based on top-line sales,

so total sales. So, let's assume you're doing a million dollars a year,

your prime cost should be less than 60%.

I'm recommending 55%, but it should be less than 60%.

Now, remember, if you don't know,

we'll put a link in here for you somewhere below,

but prime cost is the total cost of goods sold plus labor.

So, this is all of your cost of goods sold purchases

and all of your labor together should represent less than 60%, but

let's just use 60% for right now, then direct operating expenses.

This is all the other things that you buy,

but you don't really sell them back to a customer,

so it's not a cost of goods sold.

Things like toilet paper and napkins and gloves and foil,

to-go containers, chemicals.

There are things that you buy and you need,

but they don't get sold to a customer,

so technically it doesn't go in the recipe, it's not a cost of goods sold,

but anyways, that's called direct operating expenses.

Those are usually about 6-8%. Let's just go with the 6% number.

So then, if you take prime cost and DOE (direct operating expenses)

that's something that I call restaurant controllable cost.

My goal is to always keep restaurant controllable cost at about 65% total.

In this example, let's just say 66% because that's what I said earlier, 6%.

So about 66% goes to your controllables,

then rent and marketing.

Now, why am I including rent and marketing together? Well, it's pretty simple.

The better piece of property you have,

the better location you have, the less

money you're going to spend on marketing generally speaking.

If you're in a really poor location, you don't have a lot of foot traffic,

there's not a lot of customers,

you're probably going to need to spend more money on marketing.

So, I want you to set aside 10% for rent and marketing.

6% rent, 4% marketing. 8% rent, 2% marketing.

% rent, 1% marketing. Whatever you want, but about 10%

for rent and marketing, then 20% for other expenses.

. Attorneys, accountants, banks, utilities,

linens, just stuff, right? Repairs, maintenance,

electricity, telephones, all that other stuff,

credit card processing, blah, blah, blah, blah, blah, right?

20%. So now, if you add all this stuff up,

we had 60%, plus 6%, plus 10%, plus 20%,

that's 96%. That only leaves 4% for profit,

and that's assuming you're doing all that well.

Let me tell you, it's hard to get to a 6% prime cost.

When I look at the average number of all the users that are using bacon,

which is our software. You can learn more about it at Clickbacon.com.

When I look at that,

most people that get started with bacon

are averaging about 72% prime cost,

over 80% restaurant controllable cost,

there's no room for profit there.

You have got to get your prime cost below 60%.

It's hard to do and I have other videos that will link to you with

giving you tips and all the videos that I put out are going

to give you tips on how to lower food cost,

how to lower labor costs, etc., but the point is,

it doesn't leave a lot of money for profit.

So you got to be on top of your finances.

If you're struggling, actually go ahead and put a question below.

If you're struggling with any of these areas

on maintaining your profits,

if you're just struggling with profit, put a question

below and I'd be happy to answer it.

Also, don't forget to register for

that contest you could win yourself five of those Guardian Drain Locks.

One more favor to ask, I know I've already asked a lot of you,

but one more favor to ask - in order for me to keep

putting out these awesome free videos,

I need you to like the channel and share and comment, so please,

we're trying to get to a 100,000 likes this year.

So, go ahead and smash that subscribe… I am sorry, not like, subscriptions.

We're trying to get to a 100,000 subscribers this year.

So, go ahead and smash that subscribe button

so we can keep bringing you more great content just like this.

Hope you have enjoyed the video. Have a wonderful day.

I want to thank you for watching that video.

If you can do me three really quick favors right now, very quick.

The first is if you haven't already,

will you subscribe to this channel.

In a moment, some things are going to pop up on your screen, some buttons,

and one of those buttons is going to be subscribe.

So whether you're watching this on my channel, or on YouTube,

or on your phone, just stick around for one second

and you're going to see a big subscribe button. If you haven't already,

could you please subscribe.

2) if you haven't liked this video, will you go ahead and

click the like button. Actually don't just click it, will you smash that like button

and tell the world that you really enjoy this because

the way that I can continue to bring you all this great free training is

for my message to expand,

for more restaurant owners and future restaurant owners around the world

to be watching this,

and so the way to do that is to like my video.

So again, if you're watching on YouTube,

there'll be a place for you to like it, or if you're back on my website,

there'll be a place for you to like that.

So, smash that like button for me,

and then also, could you leave a comment - ask me a question.

I reply to all my comments as fast as I can, usually within about 24 hours.

Sometimes, it takes a little bit longer,

but go ahead and ask me a question,

leave me a comment, tell me you love the video,

tell me you'd like to see something else in a video.

If you need more detail on a certain area,

I can film other videos about that,

but if you can go ahead in a couple seconds, now it's going to come out.

If you can subscribe, like, and comment that would be great.

Also, there'll be a spot in the in this little button

coming out in a few seconds

where you can download something for free.

I'm always rotating that so take a look at that, some free tools,

but if you're new to my channel, if you've never seen my videos before,

they'll also be a spot for you to watch a video that'll kind of introduce

you to what I do here at the Restaurant Boss and at ClickBacon.com,

and tell you about what we do and how you can get more involved

and how you can get more free stuff and all that,

so the buttons should be coming in by now.

Go ahead and click on those and have an absolutely wonderful day.

Thank you so much.