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