I know a pizza joint that sells mostly slices, it’s about 1000 square feet total, and it makes almost a million per year with $2.5 m in revenue. I also know places that have lost 150k per year. One of them was mine.
It’s about revenue, staffing, and pricing.
Revenue is the starting point. If you don’t have good revenue then you have a money pit. I’ve had three places that failed because of lack of revenue. If you have the right thing (and right attitude) in the right place, where there are lot’s of hungry people, then you have sales. In general about $600k to $1m is a good place to be if your rent is between 2k and 8k.
If you have strong revenue then it’s about staffing and pricing. People say margins are thin in the restaurant business because they are not managing these things well or because they do not have good revenue or both. Payroll can be 30% of sales or lower (sometimes considerably lower) if you are efficient and have strong sales. Your average Applebee’s or Joe’s American grill probably hits 30% or lower with $2+ million in revenue. Your average place that’s crawling along with 400k to 600k in sales is probably at 40% payroll cost or higher, especially if you include the owner’s paltry pay (who’s probably there all the time).
Pricing is also important/critical. A good target is food cost of 30% to 33% or lower of an item’s sale price. An easy rule of thumb is figure out what an item costs then multiply that cost by 3. I’ve screwed up this easy math for years and years. It’s easy to be complacent (not update prices) and or believe you are being generous.
If you are open already and you dont know why your food cost is so high, well guess what, it’s probably because you aren’t charging enough. It’s either that or your food is walking out the door or getting thrown away.
If you have these things in order and you have good revenue then you will have a margin around 10 to 15% and in some cases much higher.
One thing to watch out for is opening something like a vegan restaurant. Unless you are an evil genius and you have the highest density of vegans on the planet surrounding your place, your revenue is gonna be low.
Pizza and beer places do well in part because virtually everyone loves pizza and beer.
– Bob Lowry