What should an average restaurant profit margin be?
The average profit margin in a restaurant is a lot lower than people think. What I see from the people that I work with is that it ranges anywhere from about 15% to, obviously, nothing. On average, I’d say most restaurants are profiting at about 5-6% of total sales which is pretty bad. However, it’s really hard to tell because some people pay themselves a salary while some people don’t so that’s going to throw off profits.
Profit margin is based on top-line sales or total sales, which includes your Prime Cost number (60%) + Direct Operating Expenses (6%) + Rent & Marketing (10%) + Other Expenses (20%). This totals 96% and only leaves 4% for profit. And that assumes your restaurant is performing well. The point here is that you have to be ON TOP OF YOUR PRIME COST number as there isn’t much room for error.
You probably have a lot more questions so please watch this free training video that takes a deeper dive into restaurant average profit margin: