Are Restaurants Profitable? Unveil the Key Metrics for Thriving in the Industry

Profit potential is a crucial factor for any business, and the food industry is no exception. Profit margins may vary considerably depending on the type of restaurant you own and operate. For instance, full-service restaurants tend to have smaller margins due to higher labor costs and table-side service, while bars typically see higher operating income margins due to the price of alcoholic beverages.

So, are restaurants profitable? In reality, it depends. Beyond the type of restaurant you own, there are many other critical factors that can impact your bottom line. Learn what it takes to thrive in this competitive market.

Factors Influencing Restaurant Profitability

• Location: Your restaurant must be in an area with high foot traffic and strong visibility. It should also be easily accessible from the road (ingress and egress) and have plenty of parking. If you choose to own a fast-food restaurant, having space for a drive-thru/pick-up window is essential.
• Lease: Negotiating a favorable lease with a landlord is critical for restaurant profitability. The terms of a lease can vary greatly depending on market conditions, supply and demand, and the overall size of the space. Think of your lease as a five-, 10-, or 20-year commitment when negotiating, because overpaying on a cost per square foot basis can have detrimental effects on your restaurant’s bottom line.
• Food and labor costs: Among the two largest restaurant costs, effectively managing both food and labor costs will positively influence your profit margins. Through efficient employee scheduling, proper portion sizes, and negotiating with your vendors, you can keep costs lower. You’ll also want to consider seasonality and its effect on ingredient costs.
• Operational efficiency: Streamlining your operational processes ensures no food goes to waste. Proper food storage systems and kitchen workflows lead to better customer service, and therefore repeat business. Investing in technology, like point-of-sale systems and inventory tracking, can further boost productivity.
• Customer retention: Retaining your current customers is far less expensive than acquiring new ones. So your loyal customer base not only drives consistent revenue, but also saves you money in marketing costs. Providing high-quality food, and friendly service in a clean environment are the best ways to keep customers coming back to your restaurant.
• Brand awareness: Every business needs to have a marketing strategy. You could serve the most delicious food in your area, but if no one knows who you are, your business will suffer. Creating a multi-faceted plan that incorporates social media content, purchasing digital ads, and even using print media will help generate buzz around your restaurant.

Why Invest in a Restaurant Franchise?

Managing all of the above on your own sounds daunting. Truth is – it can be! However, there is the option of investing with a restaurant franchise. Investing with a reputable franchise brand with proven systems and support can give you more leverage than if you were starting your restaurant from scratch. The main advantages include:

• Strong brand presence: When you join a franchise, you’ll be able to tap into an existing customer base that already recognizes the brand and product, meaning you won’t have to spend as much time or money building your name from the ground up.
• Established business model: Franchisors have spent years finetuning their business blueprint, ensuring it’s perfect before passing their knowledge and processes onto franchisees.
• Extensive training and ongoing support: As part of the franchise agreement, the franchisor must provide you with training to teach you how to run your restaurant. You’ll learn the ins and outs of the business before you open. Even after your restaurant has launched, you’ll have a dedicated operations team member who can answer questions and help you with any issues that arise.
• Vendor and supplier relationships: Franchise brands often have established relationships with trusted third-party vendors and suppliers. Because of the high volume of products purchased across the brand, franchisees benefit from better rates, thus saving you money. This advantage also extends to lenders, as some franchisors partner with third-party banks, making it easier for franchisees to secure the funding they need to launch their business.
• Network of peers: In addition to support from the corporate office, you’ll also be connected with fellow franchisees who share your professional goals. This gives you the opportunity to collaborate and learn from other entrepreneurs, helping you strengthen your own business.

Partner with Penn Station East Coast Subs

Founded in 1985, Penn Station East Coast Subs has been offering enthusiastic entrepreneurs an affordable, proven franchise opportunity for over 30 years. We have over 300 locations across the U.S. with plenty of room to continue expanding in 18 states.

Our estimated investment costs start as low as $507,500,* making our opportunity accessible to all business-minded individuals, new to investing or not. Plus, with our premium menu of grilled subs, fresh-cut fries, and freshly squeezed lemonade, you’ll be joining a brand that customers love and trust.

To learn more about our restaurant franchise opportunity, request information today, and a member of our development team will be in touch.