Restaurant Profit Margins: Industry Benchmarks & How to Improve Yours
Restaurant profit margins typically range from 3-9%. Learn what's normal for your restaurant type, how to calculate your margins, and proven strategies to improve profitability.
Restaurant Profit Margins: Industry Benchmarks & How to Improve Yours
Let's talk about the number that keeps restaurant owners up at night: profit margin.
The restaurant industry is notorious for thin margins. While tech companies enjoy 20-30% profit margins, the average restaurant operates on just 3-9%. One bad month can wipe out a quarter's profits.
But here's the good news: understanding your margins—and knowing how to improve them—is entirely within your control.
What Is Restaurant Profit Margin?
Profit margin is the percentage of revenue that remains after all expenses. There are two types:
Gross Profit Margin
Revenue minus cost of goods sold (food and beverage costs).
Gross Profit Margin = (Revenue - COGS) / Revenue × 100
Example: ($100,000 - $30,000) / $100,000 = 70% gross margin
Net Profit Margin
Revenue minus ALL expenses (the money you actually keep).
Net Profit Margin = Net Profit / Revenue × 100
Example: $6,000 / $100,000 = 6% net margin
Restaurant Profit Margin Benchmarks
By Restaurant Type
| Restaurant Type | Avg Net Profit Margin | Range |
|---|---|---|
| Fine Dining | 3-5% | 0-10% |
| Full-Service Casual | 3-6% | 0-9% |
| Fast Casual | 6-9% | 3-12% |
| Quick Service (QSR) | 6-9% | 3-15% |
| Food Trucks | 6-9% | 3-12% |
| Ghost Kitchens | 10-15% | 5-20% |
| Pizza Restaurants | 7-10% | 4-15% |
| Coffee Shops | 7-12% | 3-18% |
| Bars | 10-15% | 5-20% |
By Revenue Level
| Annual Revenue | Typical Net Margin | Notes |
|---|---|---|
| Under $500K | 2-5% | Struggling to scale |
| $500K - $1M | 4-7% | Getting efficient |
| $1M - $2M | 5-9% | Economies of scale |
| $2M+ | 7-12% | Optimized operations |
Industry Average
The typical restaurant makes 3-6% net profit margin.
That means for every $100 in sales:
- $28-35 goes to food costs
- $25-35 goes to labor
- $20-30 goes to operating expenses
- $3-6 is profit (if everything goes right)
Understanding Your Cost Structure
The Restaurant Cost Breakdown
| Cost Category | Typical % of Revenue | Target Range |
|---|---|---|
| Food Cost | 28-35% | 25-32% |
| Beverage Cost | 18-25% | 18-22% |
| Labor Cost | 25-35% | 25-30% |
| Rent/Occupancy | 5-10% | 5-8% |
| Utilities | 3-5% | 3-4% |
| Marketing | 2-5% | 3-5% |
| Insurance | 1-2% | 1-2% |
| Supplies | 1-3% | 1-2% |
| Technology | 1-3% | 1-2% |
| Other Operating | 2-5% | 2-4% |
| Profit | 3-9% | 7-10%+ |
Prime Cost: The Critical Metric
Prime cost = Food Cost + Labor Cost
| Prime Cost % | Assessment |
|---|---|
| Under 55% | Excellent |
| 55-60% | Good |
| 60-65% | Average |
| 65-70% | Concerning |
| Over 70% | Critical—take action |
Target: Keep prime cost under 60% of revenue.
The Hidden Profit Killer: Delivery App Commissions
Here's something most profit margin discussions ignore: delivery app commissions are destroying restaurant profitability.
The Real Math
| Scenario | $30 Order | Net to Restaurant |
|---|---|---|
| In-house order | $30 | $30 (100%) |
| Direct online order | $30 | $30 (100%) |
| DoorDash (25% commission) | $30 | $22.50 (75%) |
| UberEats (30% commission) | $30 | $21.00 (70%) |
Impact on Profit Margin
Let's say your restaurant:
- Does $50,000/month in sales
- 40% comes from delivery apps
- Apps charge 27% average commission
| Metric | Without Apps | With Apps (40%) |
|---|---|---|
| Total Revenue | $50,000 | $50,000 |
| Delivery App Sales | $0 | $20,000 |
| Commission Paid | $0 | $5,400 |
| Effective Revenue | $50,000 | $44,600 |
| Net Margin (6%) | $3,000 | $2,676 |
| Margin After Commission | 6.0% | 5.4% |
| Annual Profit Loss | - | $6,480 |
Delivery apps don't just take 27% of delivery orders—they effectively cut your total profit margin by 10-20%.
💡 What If You Could Keep That 27%?
The math is brutal: on thin 3-6% margins, losing 27% to delivery apps makes profitability nearly impossible. RestauNax's zero-commission platform lets you keep 100% of every order—instantly improving your margins by eliminating your biggest profit killer.
See How to Improve Your Margins →Strategies to Improve Profit Margins
1. Menu Engineering
Analyze every menu item for profitability and popularity:
| Category | Popularity | Profitability | Strategy |
|---|---|---|---|
| Stars | High | High | Promote, highlight |
| Plowhorses | High | Low | Raise price, reduce portion |
| Puzzles | Low | High | Better placement, train staff |
| Dogs | Low | Low | Remove or reimagine |
Quick wins:
- Remove or reprice bottom 10% of items
- Highlight top-margin items visually
- Train staff to suggest high-margin items
- Bundle low-cost items with premium dishes
2. Reduce Food Costs
| Strategy | Potential Savings |
|---|---|
| Negotiate with suppliers | 5-10% |
| Reduce waste | 2-5% |
| Smaller portions on low-margin items | 2-3% |
| Seasonal menu changes | 3-5% |
| Cross-utilize ingredients | 2-4% |
| Better inventory management | 2-5% |
3. Optimize Labor
| Strategy | Impact |
|---|---|
| Better scheduling | 5-10% labor reduction |
| Cross-train employees | Improved flexibility |
| Automation (AI ordering, etc.) | 10-20% labor reduction |
| Reduce overtime | 3-5% savings |
| Improve retention | Lower training costs |
4. Increase Average Check
| Tactic | Typical Increase |
|---|---|
| Suggestive selling | 10-15% |
| Appetizer promotions | 8-12% |
| Dessert upsells | 5-10% |
| Premium options | 5-8% |
| Combo/bundle pricing | 10-15% |
| Beverage pairing suggestions | 8-12% |
5. Eliminate Hidden Costs
| Hidden Cost | Solution |
|---|---|
| Delivery app commissions | Direct ordering platform |
| Credit card fees | Negotiate rates, cash incentives |
| Utility waste | Energy-efficient equipment |
| Food waste | Inventory management |
| Overportioning | Standardize recipes |
📊 Save $180,000/Year—With One Switch
You just read 5 strategies to improve margins—but eliminating delivery commissions has the biggest immediate impact. Restaurants switching to RestauNax save an average of $180,000 annually in commission fees. That's not a margin improvement—it's a margin transformation.
Calculate Your Commission Savings →The Delivery Commission Problem (And Solution)
What Delivery Apps Really Cost
| Commission Tier | What They Take | On $500K Delivery Sales |
|---|---|---|
| 15% (basic) | $75,000/year | |
| 20% (standard) | $100,000/year | |
| 25% (plus marketing) | $125,000/year | |
| 30% (premium) | $150,000/year |
Converting Delivery Customers to Direct
Every customer you move from delivery apps to direct ordering:
- Saves 15-30% commission
- Gives you customer data
- Allows direct marketing
- Builds your brand
| Conversion Rate | Annual Savings (on $500K) |
|---|---|
| 25% to direct | $18,750 - $37,500 |
| 50% to direct | $37,500 - $75,000 |
| 75% to direct | $56,250 - $112,500 |
Profit Margin Calculators
Quick Net Profit Calculator
Net Profit = Revenue - (Food Cost + Labor + Rent + All Other Expenses)
Net Margin = Net Profit / Revenue × 100
Break-Even Calculator
Break-Even Sales = Fixed Costs / (1 - Variable Cost %)
Example: $15,000 fixed costs / (1 - 0.60) = $37,500/month needed
Ready to Improve Your Restaurant's Margins?
Restaurant margins are thin—but they don't have to be. Join thousands of restaurant owners who've boosted profitability by eliminating commission fees and capturing every order.
Commission vs 27% avg
Average annual savings
Typical margin improvement
💰 Transform Your Restaurant's Profitability
The brutal truth about restaurant profit margins:
Most restaurants barely survive on 3-6% margins. Meanwhile, delivery apps take 15-30% of every order. The math doesn't work—unless you take control of your ordering channels.
The Real Path to Better Margins
| ❌ Low-Margin Reality | ✅ High-Margin Strategy |
|---|---|
| Delivery apps take 27% | Keep 100% of orders |
| No customer data | Own your customer relationships |
| Generic marketing | Targeted, profitable campaigns |
| Manual processes | AI automation |
| Reactive pricing | Strategic menu engineering |
| Working harder | Working smarter |
RestauNax: Built for Restaurant Profitability
RestauNax helps restaurants improve margins by eliminating the biggest profit killer: commission fees.
Direct Impact on Your Margins:
- $0 Commission - Keep 100% of every online order
- AI Phone Ordering - Capture missed calls (20-30% more orders)
- Customer Database - Market directly, reduce acquisition costs
- AI Menu Builder - Professional menus without design costs
- AI Food Photography - Save $500-2,000 on photo shoots
Margin-Improving Features:
- Menu Analytics - Identify your stars and dogs
- Customer Segmentation - Target high-value customers
- Automated Marketing - Drive repeat business efficiently
- Upselling Tools - Increase average check
- 26+ Free Tools - Including Menu Profit Calculator
The Numbers:
| Metric | Before RestauNax | After RestauNax |
|---|---|---|
| Delivery commission | 27% | 0% |
| Missed phone orders | 25% | 1% |
| Customer retention | 20% | 35% |
| Average order value | $28 | $34 |
| Net profit margin | 5% | 9%+ |
Real Restaurant Results:
- $180,000+/year saved on delivery commissions (avg)
- 35% increase in direct orders
- 23% higher average ticket
- 3x growth in customer database
→ Get Your Free Demo
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About the Author
Content Team
Expert content team with decades of combined restaurant industry experience.