profit margin

Finding ways to raise your restaurant’s profit margin

As inflation continues, it may be tempting to raise menu prices to offset costs and maximize your margins, but there’s another way. Rather than increasing what you charge, get creative with cutting costs to raise your profit margin.  

Improving your profit margin means you need to know your current numbers. While your gross profit margin gives you a broad look, it’s the net profit margin that paints the fuller picture. This calculates the money you have left when you subtract all costs from your total sales, including inventory, labour, and general expenses.   

Once you’ve calculated your profit margin, how do you improve those numbers and build your bottom line?

Choose automation

If there are areas where you’re performing inefficiently, automation may help save money by streamlining your processes and cutting down on your labour. For example, restaurants that have implemented online ordering have reported an 11 to 20 per cent increase in sales. This may translate to higher profit margins if it means that they can turn more tables or provide more efficient service with less staff as a result.

Reduce waste

Reports show that about 58 per cent of restaurants struggle to manage inventory. If you’re ordering too much, there’s no profit to be made on wasted items. Lower your waste by staying on top of your inventory. Have a surplus of something? Create a chef’s special to try and move that item and maintain your margins. Throwing away those carrot tops? Create a recipe that better uses what you have in your kitchen so you’re not sacrificing your margins with waste.

RELATED: Restaurants looking to lower food waste can turn to tech

Use data

You don’t have to rely strictly on technology to gain valuable insight. Audit your business from every angle to find opportunities to widen that gap between cost and revenue. Examine your traffic patterns, turnover times, and productivity to save on staffing.  

Analyse your menu, too. If something’s not selling, it may be time to take it off the menu and save the cost of the ingredients. Conversely, if you have a really hot item, you may be able to negotiate bulk pricing from your suppliers to save a few dollars and boost your profit.

Raising prices isn’t the only way to raise your margins. Once you calculate your net margin and have a baseline, look at your business to find the best ways to cut costs while still providing a top customer experience.