Modern Food Runner – Have Your Business Work for You

The restaurant industry is a mystery to most that aren't in it. A lot of entrepreneurs and investors often wonder if owning a restaurant is profitable, and if it is worth the time and money invested. For those wondering what to expect, and which types of restaurants are best, you've come to the right place. Restaurants in general are profitable for the owner, though the amount is dependent on the type of ownership, the role they play, and the type of restaurant that they own. On average it takes 1-2 years to see a profit, with most of the the initial profit being reinvested back into the business. To see how much profit a restaurant will bring in for the owner, you need to look at a few different factors to determine the margins. These factors are what most successful entrepreneurs and investors look at when deciding what kind of strategy they want to pursue. How Much Money Do Restaurant Owners Make Owners take home $24,000 to $155,000 on average. The amount depends on the size of the business - diners that bring in $1 million in sales yearly can expect to be on the lower end, while those that bring in $3 Million + can expect owner salaries closer to the top of the range. This is due to the margins on typical full-service restaurants. They range between 2.5%-5% of gross revenue on average, so the places taking in $1 Million per year can expect to payout $35,000 per year. This is assuming that there is a General Manager running the business with the owner making passive income. If the owner opts to be the General Manager, then expect the salary to climb closer to the $75k - $100k on the lower end, and $200k on the higher end. This is what a lot of entrepreneurs do when starting out their restaurant, as it not only allows them to be in more direct control of the brand, it also can really help save costs when just starting out. Of course, these numbers are highly dependent on the style of restaurant the owner has chosen. Choosing what kind of diner you want to create is often overlooked and can really hurt the owner when they realize too late how much profit they can reasonably expect. What Type Of Restaurant Is Most Profitable Bars Bars are the most profitable type of restaurant due to the high mark-up that is typically associated with alcohol. Running one doesn't take a lot of labor, and the product does not expire very often. Bars can often have profit margins of 10%-15%, much higher than the restaurant industry average. Breakfast Diners These have the same costs as full service restaurants, except for the lower food cost (Around 20%). Most plates use similar cheap ingredients and usually are quick to make. The downside to breakfast diners is the lack of dinner service, which accounts for a majority of sales in traditional eateries. Food Trucks Food Trucks pull an average of 7%-8% profit. While the food costs are usually on par with full service restaurants, the labor is substantially lower due to the nature of the mobile brand. The benefits are usually outweighed by the lack of volume one truck can do, usually peaking around $500k in revenue yearly. Virtual Restaurants/Ghost Kitchens These are great ideas when costs need to be kept low. Labor is instantly cut in half compared to traditional spaces due to only needed a small crew. A lot of "ghost kitchen's" are leased commercial kitchens, meaning the owner doesn't even need to worry about maintenance costs! Entrepreneurs can expect a 18%-20% profit doing this. How Much Profit Does A Restaurant Business Make A restaurant will generally make 2.5%-5% profit every month. Food and Labor cost make up roughly 60% of costs, with the rest taken by rent, maintenance, cost of goods sold, administrative costs, and other miscellaneous fees. Restaurants that require less food/labor cost with yield 7%-20% profits. This table shows the expected profit margins for different restaurant types, with different revenues. Yearly profits for Restaurant Type/Revenue$100,000$500,000$1,000,000$3,000,000Traditional Full-Service$3,750$18,750$37,500$112,500Food Truck$7,500$37,500$75,000$225,000Breakfast Diner$13,750$68,750$137,500$412,000Bar$12,500$62,500$125,000$375,000Virtual Restaurant$19,000$95,000$190,000$570,000Yearly Profits For Restaurant Types with Revenue Clearly it heavily depends on the restaurant type and revenue. With some of these numbers being so small, you might be asking how do the owners survive? The truth is, most of the owners of the smaller restaurants aren't relying solely on the one business to pay for their cost of living. A lot of entrepreneurs have multiple sources of income, and many investors that "own" the smaller restaurants likely own several others that total up to a nice salary. The owners that do rely on the restaurant's income are likely not passive owners. Instead, they are there almost every day bringing their brand to life. This cuts the cost of a general manager, and they would effectively increase their profit margin by a good few percent! Active owners are the ones you see running the mom & pops in every town. Passive owners are usually behind the scenes, only appearing every so often to check in on management and the business. They rely on a good General Manager to run the show, and they take the smaller profits to add to their multiple streams of income. Is Owning A Restaurant A Good Investment It is a good investment and profitable, especially if the owner decides to partake in the day-to-day operations and cut the cost of a General Manager. Even if the owner decides to be a passive owner, most restaurants are able to make a monthly profit, although it may be a smaller one. The real deciding factor on profitability is scalability. This is for a few reasons - a scalable business is, by design, a systems oriented and efficient business model. Not to mention if a business scales the owners income can increase by an unlimited amount! Franchising is a perfect example of this. Almost every big restaurant chain you know of started with just one store. A lot of them multiplied, until the owner realized franchising was a much easier and cost effective way to grow. Another investor puts up the funds and the risk, and the owner collects royalties simply for owning the brand. The elements of a franchised business help single unit businesses, even if they have no intentions of growing. To make a franchise you must first create systems that can be replicated so that anyone can buy the brand, follow the steps, and run your business. Doing so, even with just one unit, you can rest assured that your operations are as flawless as they can be. The guest experience will be more consistent, employee training will be identical, and there will be less costs to take away from the bottom line