The hospitality industry took a hard hit during COVID-19, with restaurants disproportionately impacted by a global pandemic that lasted for years. The chaos and unpredictability that ensued left many restaurant owners exhausted and eager for a reset.

Fast-forward to today, and the rising costs of goods, labor constraints, wage increases, and shifts in customers’ dining habits are once again forcing restaurant owners to sharpen their pencils and pay close attention to their bottom lines.

Unveiling Hidden Profits in Your Restaurant

The average restaurant operates on profit margins of 2%-6%, with fast-food concepts ranging from 6%-9% and full-service establishments falling into the 3%-5% range.[1] Clearly, even a minor profit decrease can create financial difficulties for restaurants.

By growing your restaurant’s margins, you can offset unexpected revenue dips, rising costs, or higher wages for your team members. You’ll also be able to reinvest in your business with equipment upgrades, the introduction of new menu items, and enhanced staff training.

Here are six ways to grow your restaurant’s profit margins:

  1. Let your staff members in on it. Don’t let your thin profit margins be a “company secret.” When staff members understand how their actions impact the bottom line, they can help maximize sales. For example, servers can be trained on how to entice diners to check out pricier menu options, thus increasing the total check size.
  2. Start a loyalty program. Borrow a page from popular franchises that use customer-facing apps to register purchases, award points, and make suggestions. When customers know they’ll save money or be treated like VIPs, they’re more likely to return.
  3. Speed up table turnover. You don’t ever want diners to feel “rushed,” but there are some adjustments you can make to improve table turnover and serve more customers. Try encouraging servers to work as a team (so customers don’t have to wait to place an order or get their bills) or identify opportunities for training to ensure all your servers are as efficient as possible.[2]
  4. Work with your bank. Unique challenges in the restaurant sector can make it hard to control cash and be financially prepared for the unexpected. To help you meet the requirements of a fast-paced retail and restaurant operation, banks like PNC offer solutions that help you optimize cash flow, accelerate receivables collection, improve your payment processes, and leverage digital reporting tools.
  5. Regularly update your physical menu. Analyze which items are selling best/worst and make some adjustments to improve your bottom line. Make menu options profitable by assessing the cost for each item, getting rid of any that aren’t making money, and creating a menu format that draws diners’ attention to choices that earn higher profits.[3]
  6. Reduce food waste. Not only is food waste bad for the environment, but it can also take a significant chunk out of your restaurant’s profits.

Minimize the amount of food you have to toss at the end of the night by ensuring proper food storage, training cooks on how to get the best yield from food ingredients, and finding creative ways to use food that would otherwise be thrown away (e.g., using leftovers to make stews or soups).[4]

Build a Strong Foundation

Profit margin is a key indicator of your restaurant’s health and an early warning sign of potential financial troubles. The tips outlined in this article can help you take proactive steps to improve profit margin and build a foundation for long-term success.