4 Ways to Save on Restaurant Labor Costs with Kickfin

In the restaurant industry, profit margins have always been tight — and these days, they’re only getting tighter

Running a restaurant is a labor intensive business. You need a strong back of house team to push out food, front of house workers to greet and care for guests, and managers to keep everyone in check. Naturally, labor is one of the most significant expenses for restaurant operators. In order to keep costs reasonable for customers, even a slight overage on labor can break your budget — but thankfully there are levers you can pull to reduce labor costs. 

If you want to secure your business’s financial future, you’re going to need to streamline scheduling practices and keep a close eye on labor costs… without frustrating employees who want more shifts. 

Don’t worry: you can turn to traditional wisdom, sales forecasting, and emerging restaurant technology to make sure that you stay on budget. 

Here are a few ways you can save on labor costs at your restaurant:

1. Rethink the schedule

Obviously, the most straight-forward way to cut labor costs is to reduce the number of people you schedule on a given night. 

We get it — you don’t want to see hour-long ticket times and poor guest experiences. But you might not need as many folks on the line or servers on the floor as you think — at least, not all the time.

Staffing and scheduling isn’t a perfect science, but there are some tactics operators should test if they’d like to “right size” every shift — including:

  • Analyze your daily schedule. Don’t make assumptions about your peak times and slow periods. Analyze sales trends and let the data be your guide.
  • Anticipate seasonal trends. If you’re in a college town, don’t wait until your servers are twiddling their thumbs in July to implement a new summer schedule.
  • Let your seasoned staff shine. Your veteran employees likely thrive on those super busy nights when they’re running on pure adrenaline (and earning way more in tips). Consider giving more experienced workers more responsibility — assuming they’re willing and able — and you might be able to get away with fewer people on a shift here and there.

>> Learn about scheduling software that helps you manage labor and engage with employees

2. Assess and address productivity 

Are you making the most of the team that you already have? There are a few ways you can identify your highest-producing employees and make the most of their success: 

  • Evaluate employee performance. Most employees want to be successful; observe your team and analyzes things like sales per labor hour, table turnover rate, and tip volume to get a sense of your strongest players and those who could use more training (and bonus: this can reduce turnover and boost team morale)
  • Provide incentives. Create a fun bonus system that rewards strong performance and high levels of productivity. You can use data from the previous data point to set goals. 
  • Cross-train employees. Training your staff to handle multiple roles – or hiring folks with vast service experience – offers flexibility for scheduling and can reduce your need for additional hires. 

3. Don’t pay employees to wait for their tips

No, we’re not saying to cut all of your servers early (no matter how much they ask).

But, you can send your servers on their way much quicker when they don’t have to wait around for managers to count out cash tips. Once they’ve finished their sidework, servers can clock out and see their digital tips sent directly to their bank account, instead of hanging around on the clock waiting for the shift manager to do their check outs. 

4. Prevent labor overages before they happen 

Most restaurants simply can’t afford to pay overtime for staff. But sometimes your full-time staff creep toward 40 hours of work without anyone noticing…and suddenly you’re paying 1.5x what you expected for a single worker. 

This, too, goes back to proper scheduling policies. Give yourself a bit of wiggle room for the employee who clocks in 10 minutes early or often takes a long time on sidework by never scheduling anyone for more than 38 hours each week. 

5. Pay close attention to clock-outs 

People make mistakes, and tired servers often leave their long double shift without clocking out for the night. Usually, they’ll realize their mistake and call the store to have someone clock them out (still adding extra time to their shift). 

But sometimes, the clock keeps running all night, and no one notices until it’s time to process payroll. Two weeks later, your admin team is spending way too much time correcting clock-outs so that you don’t end up paying for 8 extra hours of work. 

Try using technology that puts guardrails in place to prevent any clock-out mistakes before they happen. Kickfin doesn’t allow you to process and pay out tips until an employee is clocked out, so managers can make sure everyone is clocked out at the proper time. 

(We also have some other exciting new features that can make your life easier!) 

Not only can Kickfin help you reduce labor costs, but we’re ready to simplify your entire tip management process. Reach out to us to learn more about our instant tip calculations, integrations, and smarter tipping solutions.

How to Get Your Restaurant Ready for Football Season

Football is back! Whether you’re rooting for your alma mater or just hoping to see massive sales at your restaurant, it’s an exciting — but often stressful — time of year. 

If your restaurant has at least one TV, you’re going to have some customers asking you to switch it to ESPN. And if you’re running a sports bar … it’s officially crunch time. Expect your tables to be full (and harder to turn) and your staff to be running on pure adrenaline as the restaurant fills up with fans hoping for a bite to eat. 

You probably know the drill: hire more staff, add more servers to game day schedules, and manage your inventory with hungry fans in mind. But if you want to get the most out of football season, get game-ready for some of the busiest weekends of the year with our tips for a successful season. 

Consider a game day menu

When your restaurant is at full capacity with hungry football fans, you might want to consider a limited menu for the weekends in order to keep wait times down. Shorten the food menu down to shareable apps, best sellers, and items with the simplest prep so that your kitchen isn’t lined with tickets at halftime. 

At the bar, don’t limit your customers to certain cocktails — but consider the power of suggestion and list out some easy-to-batch cocktails that will keep your service bar out of the weeds. 

Make sure they can watch their game

Is there anything worse than a group of die-hard fans walking in to see their team play — only to realize you don’t have the right subscription service to stream it? Next thing you know, some guy has commandeered the remote to sign into his YouTubeTV account. 

Before that embarrassing situation arises, check your cable listings and subscription services to see if you’re missing any important channels. You’re probably going to need to upgrade in order to show games that aren’t carried in your market. Here are just a few channels you might need: 

  • ESPN+ 
  • Hulu + Live TV
  • Peacock  
  • NFL Sunday Ticket 
  • YouTubeTV or cable
  • Netflix (yep — Netflix will be streaming a few NFL games this year)

If viewing options are limited, or you don’t have enough screens to air multiple games at once, make sure you’ve got a strong wifi connection (free, of course) so that your guests can watch on their phones — or more importantly, talk smack to their fantasy league.

Offer game day deals 

Now that you’re logistically ready for the season, it’s time to draw in the customers. Make your restaurant the place for fans to gather by offering drink specials and deals on appetizers. 

Leverage social media to get the word out about your game day deals. Consider paying to boost a post or running a giveaway for people who share a post about your game day specials. 

Plan for Post-Game

You don’t want the restaurant to empty out as the clock runs down. Entice fans to stay and celebrate (or lick their wounds) once the game ends by extending deals. That could mean a discount for fans of the winning team or an extra-long happy hour. 

Pay out your employees — quickly. 

After a long game-day shift, your servers and managers are going to be more tired than usual. Let them head home early by using Kickfin to pay out tips instantly. We take care of all of the tip calculations and send tips directly to servers’ bank accounts in seconds, so your exhausted team members don’t have to wait to put their feet up and rest. 

Want to see our instant digital tip outs in action? Get a demo of Kickfin today.

Kickfin Makes Inc.’s List of Top 10 Fastest Growing Companies in the Southwest

No growing pains here! 

We’re thrilled to announce that Inc. listed Kickfin in their list of the top 10 fastest growing companies in the Southwest. (In fact, we earned the #1 spot in the software category and were listed as #9 overall!) We’re honored to be included alongside innovative companies that are making a big difference in our region. 

Inc. measured Kickfin’s growth from 2020 to 2022 — which wasn’t an easy time for the restaurant industry, to say the least. In spite of the challenges posed by the pandemic, restaurant concepts across the country embraced Kickfin’s technology. 

As a group, the 2024 Inc. honorees averaged 136% growth and created 17,606 new jobs over a two-year period. Individually, Kickfin grew by a whopping 1,304% (yes, really!).

We want to recognize and thank both our amazing customers and the Kickfin team for being part of our success story and allowing us to be a part of theirs. 

Our Customers

For years, restaurants manually calculated and paid out cash tips — despite the increasing hassle and liability those old-school methods entail. It’s not because operators are tech-averse; there simply wasn’t a good way to automate the process that didn’t create new friction or require new workarounds. 

That’s precisely why we developed Kickfin. Of course, we’re proud of what we built and the team behind it (more on that below). But we owe a great deal of our success to the customers who trusted us enough to give Kickfin a shot — especially those early adopters who are now some of our longest-standing customers.

There’s a leap of faith involved when you partner with a vendor and layer in new technology, particularly when it impacts something as important and sensitive as how you pay your people.  We don’t take that lightly, and we are incredibly grateful for the opportunity to serve each and every customer who’s been on this journey with us.

>> Hear from our customers about their experiences with Kickfin

Our Team 

Every person on our team wholeheartedly believes in our mission and vision for the future. In short: we’re here to make the tip management process insanely easy for everyone so that paying out your people is (almost!) as great as getting paid. 

As backstory: Our co-founders, Brian and Justin, came up with the idea for Kickfin while dining out together and noticing that an armored car was dropping off cash. They asked why a restaurant would need a cash delivery when most patrons pay by card; the manager explained the cash was needed to pay out tips at the end of the shift. The inefficiency (and expense, and risk…) of that process was a lightbulb moment for Brian and Justin.

They set out to build a team who not only understood the problem, but could think critically and creatively about a solution — and bring it to life. 

From sales and marketing to product and support, every Kickfin employee has had a hand in the growth and success of our company, thanks to their passion for our purpose and their commitment to being best in class.

We’re proud of what we’ve achieved thus far, and we’re excited to continue collaborating with our customers, innovating on their behalf, and taking Kickfin to the next level together. Onward and upward!

Reporting Tips on Taxes: 5 Questions Your Restaurant Staff Is Probably Asking

It’s no secret that tax season is confusing and stressful, especially when you work in the hospitality industry. Many restaurant employees — whether they’re newbies or seasoned pros — aren’t exactly sure what’s required when it comes to reporting their income and filing taxes. There tends to be a lot of misconceptions particularly when it comes to reporting on tips received.

Maybe your employees are asking questions, or maybe you have a hunch that they should be asking questions. If that’s the case, we’ve taken the liberty of answering a few FAQs that your staff might find helpful. (Obligatory disclaimer: Of course, this is not intended to be tax, legal or accounting advice, and it’s always best to point them in the direction of a certified tax pro if they need help!). 

1. Do I have to report my tips to the IRS? 

Short answer: yes. 

Employees are required to report all income, including tips received while working at a restaurant, on their tax returns. This includes cash tips, credit card tips, and tips received via electronic payment platforms. 

Accurately reporting your income, including the tips you’ve earned, ensures that you avoid penalties and legal issues. But it’s not just about ensuring “Uncle Sam” gets his due; it also behooves you to avoid underreporting your earnings. More on that in a minute…

To make things easier, it’s advisable to keep detailed records of your tips to ensure accurate reporting come tax time. (If you’re a Kickfin user, of course, that’s easy to do!)

These days, you probably receive tips from customers in one of two ways: either they add a tip via credit card when they pay the bill, or they’ll leave a cash tip. Here’s what to know about reporting credit card tips and cash tips to the IRS

Reporting credit card tips

Most restaurants use POS systems to run their front-of-house operations. When customers leave tips on credit cards, they’re getting tracked in the POS and reported to the IRS by your employer. As a result, those tips are going to be included on the W-2 or 1099 that your employer gives you.

That’s because your employer is responsible for paying taxes on your tip earnings, too. In addition to paying payroll taxes, employers are required to withhold income taxes, Social Security taxes, and Medicare taxes on those employee tips, just as they would on other forms of employee compensation. They must keep accurate records of all tips reported by employees and include those amounts when filing employment tax returns.

(Keep in mind: this is the case for all tips left on credit cards, no matter how your employer is paying out those tips — cash, digitally, paycard or payroll. In other words, even if you’re leaving your shift with a wad of cash in your wallet, the IRS is well aware that you earned those tips, assuming your customers are primarily paying with credit cards.)

What’s more: because cash tips are less common and POS data is readily available, the IRS collects income information based on the credit card tips you input through their SITCA program. So, there’s really no way around reporting credit card tips to the IRS, and you’ll be liable for income tax on those tips. 

>> Learn more about SITCA and tip reporting

Reporting cash tips

This is where things can get a little muddy. 

It’s been common practice in the restaurant industry to under-report cash tips (or not report them at all). Technically, this is illegal. 

Bottom line: Employees are required to report all tips received when you file your taxes, including cash tips that were not run through your restaurant’s POS. Again, if you don’t accurately report your tip earnings, you could face financial and/or legal penalties. 

2. Does it affect my employer (and will they care?) if I under report my cash tips? 

Most restaurants are using the tip credit to decrease their monthly labor costs — so under reported tips could cause them some problems. 

Your employer’s biggest concern here is making sure that you earn at least minimum wage with the addition of your tips. If the majority of your tips are coming from credit cards, those are already automatically reported through your POS system, and your employer can track them for compliance purposes. But if you’re the rare server who earns more cash these days, then under reporting tips could cause a big spike in labor costs for your employer. 

In short, your employer probably won’t care if you don’t report all of your cash tips, but there are some serious reasons why you should…

3. What happens to me if I under report my cash tips? 

Leaving those cash tips untaxed might give you more freedom in the short run, but it could affect your future financial security. 

  1. You run the risk of being audited. No, it’s not super likely, but there’s always a chance that the IRS may be suspicious of your reported sales compared to your reported tips. This discrepancy could cost you in the long run.

  2. Unemployment and disability payments are based on wages. If you’re under-reporting your tips, it could hurt you if you ever need to rely on unemployment or disability (which many restaurant employees had to do during the pandemic). With your income artificially decreased, you’ll have to live off of much less than you’re actually owed.

  3. It may be harder to make investments in your future. We know great servers who are raking in the cash… but when you’re ready to make a major financial move, you might not have the documentation to back it up. For example, you might love a house that is technically in your budget, but without proof of your entire income, you might not qualify for a sizable enough home loan or be able to prove that you make three times the rent.

4. How does my tip reporting affect my taxes? 

Ultimately, how much you report in tips will determine how much you owe in taxes — that’s kind of the whole point of reporting your income. The more you report, the higher your tax liability. 

5. Why do I owe taxes every year? Aren’t they supposed to be withheld from my pay? 

They are — but your hourly wage probably isn’t enough to cover your entire tax responsibilities. You might remember picking up several $0 paychecks throughout the year. 

This isn’t necessarily a bad thing: many financial experts say that it’s actually better to owe taxes when you file. That means you had more freedom to invest throughout the year, and that you weren’t offering the government a loan that they have to pay back in April. 

But we get it. That big tax refund is way more fun to see hit your bank account, and you might not be prepared to pay up if you owe. If you’re afraid that you’ll owe taxes (or panicking about where you’re going to get the money to pay them), here’s what you can do to ease your burden. 

  • Set taxes aside each week. Even though you’re walking out with tips in hand (or in your bank account), that doesn’t mean they aren’t going to be taxed eventually. Each week, count up your tips and set 10-15% aside to save for tax season. If you have extra money leftover — take a vacation!

  • Explore write offs and deductions. Did you pay for your own uniform? Or for a safe alcohol service course? Are credit card fees taken out of your tips? All of these are deductions that you can use to reduce how much you owe.

  • Keep precise records. You’ll need to know how much you spent on work-related expenses and will need to back it up with documentation. If your employer is using Kickfin, your account is a great source of truth for all of your tip payout information. 

All of this reporting and recordkeeping can feel overwhelming — especially for servers who can’t remember how much cash they left with last night, let alone a year ago. Make sure your employees have all the tools they need to make smart financial decisions. Check out how Kickfin’s reporting can make life easier for managers and servers alike.

Guide to Restaurant Training: What to Cover and Why It’s Important

Restaurant training is a method for restaurant owners and managers to equip staff with the knowledge and skills they need to do their jobs. This training covers key areas such as customer service, food preparation, and safety procedures. Effective training is crucial as it enhances service quality, improves staff morale, and leads to a profitable and well-run restaurant.

What Is Restaurant Training?

Restaurant training is the process of teaching new and existing employees the things they need to perform their job duties effectively. This includes everything from learning how to use the equipment and tools in the kitchen to understanding menu items, serving customers, preventing foodborne illness, and reacting appropriately in emergencies.

Restaurant training isn’t limited to new employees. It’s also crucial for existing staff to receive ongoing training to keep up with changes, trends, and standards. Providing high-quality training is an investment in your employees and your business, as properly trained staff can boost the efficiency and productivity of your restaurant, improving customer satisfaction and profits.

Why Restaurant Training Is Important

Restaurant training helps restaurant owners and managers build a competent staff and create a good dining experience for patrons. Restaurant training is important because it can:

  • Build skilled and motivated teams. Effective restaurant training ensures staff members have the skills and information necessary to perform their duties efficiently.
  • Maintain consistency. Through proper training, your staff members can learn the correct procedures, techniques, and standards to maintain consistency in service and food. This ensures a consistent experience for customers every time they visit your restaurant.
  • Improve customer satisfaction. Well-trained employees are better equipped to handle customer inquiries and complaints effectively. This improves customer satisfaction, leading to increased sales and positive reviews.
  • Reduce employee turnover. Investing in your employees through training can also help boost morale and reduce employee turnover. When staff members feel valued and equipped with the necessary skills, they are more likely to stay with your restaurant. 
  • Create growth opportunities. Good training also provides employees with opportunities for professional growth and development. Continual learning leads to increased knowledge, skills, and expertise, opening up new career opportunities within the restaurant industry.
  • Ensure compliance with regulations. The restaurant industry is highly regulated, with specific rules and regulations that you and your employees must follow. Through proper training, your staff can learn the guidelines and procedures to ensure compliance with health and safety regulations, food handling standards, and other requirements.

Types of Restaurant Training

You can implement several types of restaurant training to ensure your team is efficient, confident, and ready to provide the best possible service. These are the main types of restaurant training and why each is important.

Basic Training

Basic training in a restaurant primarily involves orientation and familiarization with the employee handbook. This includes introducing new hires to the restaurant’s culture, values, and expectations. You can also use orientation to clarify job descriptions, roles, and responsibilities. 

Basic training also covers a thorough understanding of the employee handbook, which outlines the restaurant’s policies, procedures, and standards, along with information about employee benefits, code of conduct, and guidelines for addressing grievances. The handbook serves as a reference tool that employees can consult whenever necessary.

Front-of-house Training

Front-of-house training refers to the education and instruction given to employees who directly interact with customers – including bartenders, servers, hosts, and bussers. This training is vital as these individuals are the face of the restaurant, and their performance directly impacts customers’ dining experience.

The training typically includes modules on customer service skills, menu knowledge, and restaurant operations. It teaches employees how to interact with customers professionally, handle complaints, and deliver an exceptional dining experience. It helps staff anticipate customer’s needs and exceed their expectations.

Back-of-house Training

Back-of-house training is for staff members who work behind the scenes, including chefs, line cooks, dishwashers, and prep workers. This type of training focuses on culinary skills, food prep techniques, plating presentation, inventory management, equipment usage, and safety protocols. 

Such training can ensure consistency in food taste and presentation, leading to a more satisfying customer experience. Employees are also trained on proper food storage, temperature control, cross-contamination prevention, and cleaning and sanitizing procedures. This helps prevent foodborne illnesses, ensures the health and safety of customers, and maintains the restaurant’s reputation.

Technology Training

Technology training is an increasingly critical component of employee training in modern restaurants. It involves equipping staff with the knowledge and skills to operate and maximize the use of various tools, including point-of-sale (POS) systems, reservation systems, kitchen display systems, and digital menu boards. It may also cover mobile and online ordering platforms and social media platforms for marketing and customer engagement purposes. 

You should train employees not only on how to use these systems but also on troubleshooting common issues and understanding how these tools contribute to the overall operation and success of the restaurant.

However, technology training is not a one-time event. As restaurant technology evolves rapidly, you must regularly update training programs for new features or systems. 

Cross-training

Cross-training in a restaurant is the process of training employees to perform multiple roles within the business beyond their primary job responsibilities. For example, this might involve a server learning how to operate the bar, a line cook understanding the nuances of customer interaction, or a host gaining a general understanding of the processes and pressures of the kitchen. 

Cross-training is immensely helpful in creating a versatile workforce that can adapt to various situations and lend a hand when necessary. Furthermore, cross-training fosters a sense of teamwork and empathy among staff. When employees have a first-hand understanding of the challenges their colleagues face, they are more likely to collaborate effectively and support each other.

Restaurant Training Methods

The methods employed for restaurant staff training can significantly influence the effectiveness of the training program. Whether traditional face-to-face training, interactive online modules, or on-the-job training, the goal remains: to equip your staff with the necessary knowledge and skills to provide exceptional service and ensure smooth operations.

One-on-one Training

One-on-one training is a personalized approach to personnel development where a more experienced staff member – often an owner or manager – provides direct instruction to a less experienced employee. This training method allows for immediate feedback and ensures the trainee comprehends all aspects of their role. It can be used to cover everything from specific job skills to restaurant policies, customer service standards, and understanding the restaurant’s culture and values.

One-on-one training is particularly beneficial when new employees first join a restaurant staff and need to understand their roles and responsibilities comprehensively. It is also a good fit when an employee transitions to a new position, needs to improve specific skills, or when the restaurant introduces new equipment, software, or procedures. The targeted instruction and individual attention can help the individual understand and adapt to their new responsibilities or changes more effectively.

Group Training

Group training involves providing instruction to multiple employees simultaneously, often in a group setting or through seminars or workshops. This method can facilitate the sharing of ideas and experiences among participants, promote teamwork, and create a sense of camaraderie. 

Group training can be effective when you need to train many employees at once, such as during restaurant-wide policy changes, menu updates, or new system implementations. It also proves advantageous when reinforcing general knowledge or skills that apply to all staff, such as customer service principles or food safety norms. Additionally, group training can be a good fit when promoting team-building and enhancing internal communication.

Online Training

Online training is the use of digital resources to deliver training programs to employees in the restaurant industry. This method leverages digital platforms such as training software, videos, webinars, and virtual reality simulations to instruct employees on various aspects of restaurant operations. 

Online training may be a good fit in several scenarios within the restaurant industry. For instance, it’s particularly effective when training on theoretical concepts or standard procedures that do not require hands-on practice, like understanding company policies or learning how to use a new software system. It can also benefit ongoing learning, allowing continuous access to resources for self-paced learning. 

Which Method of Training Do Most Restaurants Use?

There is no one-size-fits-all approach when it comes to restaurant training. Every restaurant has unique needs and preferences, depending on factors such as the size of the staff, type of cuisine, and company culture. However, most restaurants tend to use a combination of one-on-one, group, and online training.

For example, one-on-one training is essential during the initial hiring process and when introducing new employees to the restaurant’s culture, values, and specific job skills. Group training is typically used for delivering standard information across all employees, promoting teamwork, and enhancing internal communication. Online training can be a convenient and flexible option for ongoing learning and development, especially in today’s digital age.

Ultimately, any restaurant’s most effective training program depends on its specific needs and goals. A well-rounded training program that incorporates a mix of one-on-one, group, and online methods can ensure that all employees receive comprehensive instruction and have the skills they need to excel in their roles.

How Much Does Restaurant Training Cost?

The cost of restaurant training can vary widely, depending on the type of training and the size of staff, the complexity of operations, and other specific business needs. Many restaurants may handle all training in-house, using their resources and staff members as trainers. In this case, training is often more expensive, requiring only the time of existing employees.

However, some restaurants may opt for external training programs that provide instruction to the restaurant industry. These programs may offer a broader range of topics and more comprehensive training plans, but they can also come at a higher cost.

For businesses that choose to leverage outside programs, the costs of training can vary significantly based on the types of training provided, the systems being covered, the complexity of the restaurant’s systems, and the number of employees being trained. Some providers offer packaged courses for a set fee, while others may charge per user or course.

The Importance of Ongoing Training

Comprehensive restaurant training ensures that employees are up-to-date with the latest information and equipped with the necessary skills to perform their duties effectively. This training can also improve employee morale and retention and enhance job performance, ultimately benefiting the restaurant’s overall success.

Effective training is a vital component of any successful restaurant. Whether through one-on-one sessions, group training, or online courses, investing in the development of employees can lead to improved job performance and contribute to the overall growth and success of the establishment.

How To Write a Restaurant Employee Handbook

A restaurant employee handbook is a document that outlines a restaurant’s policies, procedures, and expectations for your team. It’s an essential guide for owners, managers, and employees that clearly communicates information necessary for a restaurant to operate safely and efficiently. 

In this article, we’ll review the steps required to create a practical and effective employee handbook for a safe, profitable restaurant.

What Is a Restaurant Employee Handbook?

A restaurant employee handbook is a comprehensive document that outlines the policies, procedures, and expectations for employees and managers in a restaurant business. It serves as a valuable resource for both new and seasoned staff members, offering a clear description of their roles, responsibilities, and the standards they’re expected to meet.

The purpose of an employee handbook is to establish clear safety practices and sound procedures for operating various aspects of a restaurant business. It is the go-to guide for the restaurant’s mission, values, and culture. Items covered in a handbook typically include dress code policies, guidelines for customer service, health and safety procedures, tips and gratuity policies, and procedures for reporting grievances or issues in the workplace. 

Why Restaurants Need an Employee Handbook

Like any other business, restaurants use employee handbooks as a critical tool for managing employees and communicating expectations. A well-written handbook is an ideal way to articulate the company’s objectives, culture, and values. Furthermore, it provides clear guidelines on how to conduct oneself in various situations, minimizing misunderstandings and helping to ensure all of a restaurant’s employees and managers are on the same page and working towards common goals.

Additionally, an employee handbook serves as a reference for legal issues and disputes such as fair treatment, equal opportunity employment, and harassment policies. This protects the employer and the employees by outlining their rights and responsibilities. Such a guide helps ensure smooth operation, improves employee morale, boosts productivity, and contributes to the restaurant’s overall success.

Sections to Include in a Restaurant Employee Handbook

A restaurant employee handbook is an essential communication tool for restaurant owners and employees. A well-written and comprehensive employee handbook can be an effective tool for onboarding and maintaining a satisfied and informed staff. These are some of the main sections to include in a restaurant employee handbook:

Welcome and Restaurant History

Most employee handbooks start with an introduction to the business and an overview of the restaurant’s journey. These items serve as a welcome to new team members and convey appreciation for joining the restaurant’s team. This section should also review the restaurant’s history, including significant milestones and the vision for the business. It should discuss the restaurant’s culture and values, touching upon its mission and the standards it wants to meet.

Policies and Procedures

Next, a restaurant employee handbook should set forth various policies and procedures that employees must follow. These include punctuality, attendance, dress code, and behavioral expectations. The handbook should also describe how to call in sick, request time off, and follow scheduled break times. Customer service standards, food safety, and cleanliness policies should be clearly defined. This section should also include the restaurant’s policy on tip sharing, handling cash, and what constitutes acceptable and unacceptable behavior in the workplace.

Remember, the aim here is to foster a culture that embodies the restaurant’s values and promotes a safe, respectful, and professional environment. Providing clear guidelines helps to eliminate ambiguity and sets clear expectations for all employees, including managers.

Employee Dress Code

The dress code section is a crucial part of the restaurant employee handbook as it details the appearance standards employees are expected to maintain. This section should clearly outline the restaurant’s specific dress code, whether it requires uniforms, guidelines on acceptable casual wear (if allowed), or formal attire. It should also provide information about required accessories, such as name tags, aprons, or specific footwear.

This section may additionally cover policies concerning personal hygiene, tattoos, piercings, and other aspects of personal presentation that could impact an employee’s professional appearance.

A well-dressed, neat employee makes a positive impression, reflecting the restaurant’s commitment to professionalism and high standards. Furthermore, roles involving food handling, hygiene, and cleanliness are not just about making a good impression—they’re vital for maintaining food safety standards. 

Employee Conduct

The employee conduct section should clearly outline the codes and ethics governing each employee’s actions. This section might include guidelines about maintaining a positive and respectful attitude towards coworkers, supervisors, and customers and rules against workplace harassment, discrimination, or any other form of misconduct. It can also cover honesty, integrity, confidentiality, and adherence to the restaurant’s policies and procedures. This section can address the fact that alcohol and drug use are not tolerated in the workplace due to their potential to impair employee performance and jeopardize safety.

The employee conduct section lets you set your restaurant’s behavioral standards and cultural tone. It’s essential to laying the foundation for a respectful and harmonious workplace environment. Outlining the consequences of not adhering to these guidelines also provides a measure of disciplinary control, ensuring each employee is aware of the potential ramifications of failing to meet the standard you set.

Compensation and Benefits

The compensation and benefits section of the restaurant employee handbook should detail the remuneration employees can expect and the benefits provided. This section should clearly explain the pay structure, including the frequency and method of payment, such as whether it’s hourly or salaried and whether payments are made weekly, bi-weekly, or monthly. The handbook should also include information about overtime pay, holiday pay, or other special pay rates (if applicable). The restaurant’s policy on tips—whether they are shared, pooled, or given directly to individual servers—should also be clearly laid out.

Additionally, this section should outline the benefits offered by the restaurant, such as healthcare plans, retirement options, meal discounts, paid time off, and any other employment perks. Also, clearly explain the eligibility criteria and processes necessary to obtain these benefits. 

Health and Safety Guidelines

The health and safety guidelines are some of the most essential items in a restaurant employee handbook as they ensure the well-being of the staff and patrons. This section should emphasize the restaurant’s commitment to providing a safe and healthy work environment. It should detail measures to prevent accidents, such as keeping walkways and workspaces clear of hazards and correctly storing and using equipment. It should also include guidelines for the following:

  • Food safety: Describe applicable food safety regulations to prevent foodborne illnesses, like correct food handling, storage, and preparation, personal hygiene standards, and procedures for cleaning and sanitizing equipment and surfaces.
  • Handling of alcohol: If the restaurant serves alcohol, include guidelines on responsible service, including checking identification and refusing service to intoxicated patrons. 
  • Emergencies: Dedicate a portion of this section to emergency procedures, including what to do in case of fire, injuries, or other urgent situations. Include clear instructions on how to use fire extinguishers, the location of first-aid kits, and the protocol for reporting accidents or injuries. This section should also outline the restaurant’s policy on handling health-related issues, such as what to do if an employee is sick or suspects they have contracted a contagious disease.

Equal Opportunity and Anti-Discrimination Policies

This section should outline the restaurant’s commitment to providing equal employment opportunities regardless of race, color, religion, gender, sexual orientation, age, marital status, national origin, or disability. It should clearly state that discrimination is unacceptable and will result in disciplinary action. It should also provide information on how to report incidents of discrimination or harassment and the steps taken by the restaurant to address such issues. This section should align with federal and state employment laws and promote a workplace culture of diversity, inclusion, and fairness.

Communication Policy

An employee handbook should also include a section outlining times and methods of communication between employees, supervisors, and management. It should outline the procedures for addressing grievances or concerns without fear of retaliation. It should promote transparency, trust, and a healthy work environment where management can address problems promptly and effectively.

Tips for Writing a Restaurant Employee Handbook

Creating a restaurant employee handbook is essential to establishing a well-structured and smoothly operating restaurant business. Here are some tips to ensure your restaurant employee handbook is practical and user-friendly:

  • Make it comprehensive but concise. A good handbook covers all necessary topics but avoids unnecessary complexity. Use clear and concise language to ensure the information is easy to understand and digest.
  • Use a positive tone. Even though the handbook contains rules and regulations, strive for a positive tone. Doing so will help your employees feel welcome and valued rather than overburdened by numerous rules and policies.
  • Comply with legal requirements. Ensure your handbook complies with all local, state, and federal laws. Consult an attorney if you’re unsure about any particular items or sections.
  • Include visuals when possible. Photos, diagrams, and infographics can make your handbook more engaging and easier to understand, especially when addressing things like safety procedures or the proper handling of equipment.
  • Regularly update the handbook. Laws and restaurant policies can change, so update your handbook regularly.
  • Encourage feedback from employees. Let your employees know that their feedback on the handbook is welcome. This can help you identify any areas that may need clarification or improvement.

Your restaurant employee handbook is vital in communicating with your staff. A good handbook can foster a positive work environment where everyone understands their roles, rights, and responsibilities, making it easier to train employees and reducing unnecessary turnover among your staff.

The Ultimate Guide to Franchise Restaurants

Franchise restaurants are establishments licensed to operate under a brand name using specific products and business models. We’ll provide insight into what these restaurants are, the benefits and drawbacks of running a franchise, and how to launch and operate your franchised restaurant successfully.

What Is a Franchise Restaurant?

A franchise restaurant is a dining establishment that operates under a franchise agreement, entitling the owners to use a brand name they don’t own. The franchisee, or owner of the individual location, pays for the rights to use the franchise’s brand name, logo, business model, and products.

A franchise business structure allows individual franchise restaurants to benefit from the larger brand’s established reputation, best practices, and customer base. While they have to adhere to guidelines set by the franchisor regarding food quality, service standards, and restaurant decor, franchisees also get support in areas like marketing and supply chain management.

Pros and Cons of Investing in a Franchise Restaurant

As with any restaurant, franchises have advantages and disadvantages. Understanding the pros and cons of investing in a franchise can give you a better idea of what to expect from franchising and whether the franchise business model may be right for you. 

Pros

  • Proven business model: Franchise restaurants operate on an established business model. This considerably reduces the risk of failure compared to starting a restaurant from scratch. As a franchisee, you can leverage the franchisor’s experience and expertise, learning from their best practices.
  • Brand recognition: Buying a franchise means investing in a known and trusted brand. This instant brand recognition can attract customers right from the start, giving you a head-start on marketing that can be expensive and time-consuming.
  • Ongoing support: Most franchisors provide continuous support to their franchisees. This can range from initial training, site selection, and construction support to long-term operational and marketing assistance. This support can be invaluable, especially for first-time operators.
  • Greater purchasing power: Being part of a franchise network often means benefiting from the franchisor’s purchasing power. Franchises often negotiate lower inventory, equipment, and supplies prices, saving individual franchisees money.
  • Easier access to financing: Financial institutions are often more willing to lend to franchisees due to the lower risk associated with the business model. This can be a significant advantage when covering the considerable costs of building out and equipping a restaurant.

Cons

  • High initial investment: Franchise restaurants often require a substantial upfront investment. This can include the franchise fee, construction costs, equipment, and inventory purchases. These costs can be considerable and may take two years or more to recoup.
  • Ongoing fees: As a franchisee, you must often pay the franchisor ongoing royalties and other fees. This is usually a percentage of your gross sales, regardless of your profitability. 
  • Limited creativity and flexibility: While a proven business model is a plus, you have less freedom to make decisions. The franchisor sets the menu, decor, uniform, and operating procedures. This lack of control may not suit entrepreneurs who prefer flexibility in running their businesses.
  • Dependence on the franchisor’s reputation: Your success as a franchisee is closely tied to the brand’s overall reputation. Any negative press or scandal involving the franchisor can harm your business, even if your specific restaurant is performing well.
  • Potential profit sharing: Some franchisors require franchisees to share a portion of their profits. You’ll need to review the franchise agreement to understand all the obligations carefully.
  • Rigorous standards and rules: Franchisors often have strict rules and standards to ensure uniformity across all locations. Compliance with these standards can be challenging, and failure to meet them could lead to penalties or even termination of your franchise agreement.
  • Termination risk: Franchise agreements typically have termination clauses. If a franchisee doesn’t meet certain performance standards or violates the agreement, the franchisor has the right to terminate the contract. 

How Much Does It Cost to Buy a Franchise Restaurant?

The cost of buying a franchise restaurant varies greatly depending on the specific brand you choose to affiliate with, the location of your restaurant, and the buildout required. Generally speaking, you’ll be required to pay a franchise fee of at least $10,000 to $25,000, the cost to acquire and renovate a property, staff costs, marketing fees, and ongoing expenses like royalties. 

Here’s some detail on what you can expect to pay when opening a franchise:

Franchise Fees

A franchise fee is the initial cost a franchisee must pay to gain the rights to operate a franchise. These fees typically cover the franchisor’s administrative expenses, training, site assistance, and the right to use the franchisor’s trademarked brand, including their name, logo, and other materials. 

Franchise fees can vary significantly based on the brand’s recognition, success, and the resources provided by the franchisor, but generally range from $10,000 to $50,000. However, some high-profile restaurant franchises can command fees of $100,000 or more. 

Real Estate Costs

Real estate costs are the expenses associated with securing a physical location for your franchise to operate. These costs vary greatly depending on the size, location, and whether you buy or lease the property. Also included are costs associated with renovating the space to meet the franchisor’s specifications, which include interior design, signage, and equipment installation. 

If you are leasing, monthly rental rates could range from a few thousand dollars to tens of thousands. If you are purchasing a property, you can expect to pay several hundred thousand dollars to a few million. However, if you buy and later close or move your franchise, you can often recoup a large portion of your real estate costs by selling the property.

Marketing Fees

Marketing fees charged by some franchisors contribute to the brand’s regional and national advertising efforts. These fees are sometimes a percentage of your gross sales – often between 1% and 4% – and are used to promote the brand through various marketing activities such as social media advertising, TV commercials, print ads, and promotional campaigns. 

While you benefit from the franchisor’s marketing efforts, you may still need to budget for local marketing to raise awareness of your specific location.

Royalties

Royalties are ongoing payments that franchisees make to franchisors in return for the continuous use of the franchisor’s brand name and business model. The royalty fees also often cover the franchisor’s support services, such as training, operational support, and updates to the business model.

Royalty fees are typically calculated as a percentage of the gross sales of the franchise restaurant and often range from 4% to 8%. Some franchisors may also have a minimum monthly royalty fee, which franchisees must pay regardless of their sales volume.

How To Open a Franchise Restaurant

Opening a franchise restaurant typically requires following a well-formed process established by a franchisor. While the process is exciting, it’s often much more complex than opening a standalone restaurant. 

Here’s an outline of the process for establishing a new franchise restaurant:

  • Thoroughly research franchise opportunities. Start with extensive research into available franchise opportunities, industry trends, and market demand in your planned location. Analyze the success rate, brand reputation, and support system each franchisor offers before making a decision.
  • Hire a consultant with experience opening franchise concepts. If you’re new to franchises, consider engaging a professional consultant with experience opening franchise restaurants. These consultants can provide valuable advice, prevent costly mistakes, and help streamline the process. For example, consider consultants like Monte Silva, who have a proven track record in this field.
  • Understand the financial commitment. Familiarize yourself with all the costs of opening and operating a franchise restaurant. This includes franchise fees, real estate costs, marketing fees, and royalties. Review the specific costs of individual franchisors and prepare a business plan to manage these expenses.
  • Arrange your finances. Ensure you have adequate funds to cover the initial investment and running costs until the restaurant becomes profitable. This typically involves arranging debt financing as saving or raising equity funds to cover part of your upfront costs.
  • Meet compliance requirements. Consult an attorney to understand the legal requirements, franchise agreements, and other regulations related to owning a franchise restaurant in your desired location.
  • Choose a location. Decide on a location that ensures high traffic and easy accessibility for your target audience. It should also be in line with the brand image of the franchisor.
  • Recruit and train staff to follow brand standards. A well-trained team can enhance customer experience and ensure smooth operations. Make adequate provisions for their training as per the guidelines of the franchisor.
  • Make the most of marketing and promotion. Use online and offline marketing strategies to create brand awareness and attract customers. This could involve social media advertising, local radio spots, hosting a grand opening event, and other steps recommended by the franchisor.

Owning a franchise restaurant is a significant commitment. It requires a strong dedication to a brand and its operational standards, as well as a relentless focus on customer satisfaction. However, if you follow the process carefully, partner with a strong franchisor, and manage your location effectively, it can be a rewarding and satisfying experience.

Hot Tips & Takes w/ Jaimeen Dalia: How Can Emerging Restaurant Franchises Succeed

Meet Jaimeen. 

He’s grown up in a family of franchisees, and now he’s using his inside knowledge of the industry to connect franchisees with their peers and with technology. As the founder of FranTable, Jaimeen Dalia brings a wealth of knowledge across franchises of varying sizes and industries. We sat down to talk to him about the advantages of purchasing a franchise and how emerging restaurant franchises can stake their claim in the current landscape. 

What is an emerging restaurant franchise?

The definition of an emerging restaurant franchise can vary depending on who you ask within the franchising industry. 

A commonly accepted definition is that any brand with fewer than 100 units is considered an emerging franchise, while enterprise brands are characterized by having over 500 units. Emerging franchises often have a larger pool of available territories, which can be an appealing prospect for potential franchisees. 

What are the pros of purchasing a franchise over opening your own independent restaurant?

There are several significant advantages to opting for a franchise as opposed to launching an independent restaurant. Firstly, franchisees benefit from the established brand equity of well-known franchises, which can be a game-changer for new businesses. Imagine a scenario where a new resident is deciding between a local eatery and a nationally recognized franchise; the trust associated with the familiar brand often sways the decision in its favor.

Another key advantage is the potential for more favorable rates with vendors.  Franchise brands tend to have more bargaining power with their vendors, given the large volume of supplies they purchase, from food ingredients to everyday items like paper towels. This leverage allows local franchise owners to access better deals on essential supplies, which can be challenging for small business owners operating independently.

Lastly, franchise ownership offers accelerated learning curves when it comes to business development. Independent entrepreneurs typically spend months, if not years, fine-tuning fundamental aspects of their business, such as understanding customer preferences, pricing strategies, and marketing tactics. By partnering with a reputable franchise brand, franchisees can tap into the wealth of knowledge and experience of the franchise brand. 

What challenges do emerging franchises face that are different from independent restaurants and enterprise brands?

I think the number one challenge for emerging franchises is their limited capacity to provide robust support to their franchisees. Unlike well-established enterprise brands with ample resources and a large workforce dedicated to operations, marketing, and sales, emerging franchises typically operate on tighter budgets and have fewer full-time people on staff. This can sometimes impact their ability to provide the necessary assistance and guidance to their franchisees.

Number two; emerging franchise brands often face a significant challenge when it comes to raising capital to support their franchisees. While established franchises have a track record of success and access to more traditional financing options, newer brands tend to lack the same level of credibility and may struggle to attract investment. This can affect their ability to expand, provide ongoing support to their franchisees, and develop effective marketing and operational strategies. To overcome this challenge, emerging franchise brands need to be innovative in how they pursue fundraising, explore alternative financing options, and demonstrate a clear and compelling vision for their business to attract potential investors and lenders.

The third challenge would be the tough competition they encounter from larger, more established brands. They can struggle to distinguish themselves in a market where a number of well-known names already dominate the consumer landscape. Something I’ve noticed often is how even small coffee franchises with just a handful of locations often tend to be compared to mid-tier and enterprise-level coffee giants. Emerging franchises need to get creative with their marketing and product innovation so they can carve out their niche.

What advantages do emerging franchises have over enterprise brands?

Emerging franchises can have some unique advantages over their enterprise counterparts. One notable advantage is their agility and speed in decision-making and support. As a franchisee within an emerging brand, individuals often enjoy direct access to the brand’s executive team, sometimes even the founders. This level of direct engagement allows emerging franchises to be more hands-on and responsive. This close collaboration with founders and experienced executive teams can be particularly beneficial for less experienced franchisees. Generally, such personalized support is not as readily available within the larger enterprise brands.

Emerging franchises are also typically more flexible in adapting to local market conditions and changing customer preferences. They can often customize their products, services, and marketing strategies quickly to better cater to the unique needs of their specific locations. This nimbleness and ability to pivot quickly helps form stronger connections with the local community and drive higher customer satisfaction.

In many cases, emerging franchise brands may also require a lower initial investment from franchisees compared to larger enterprise brands. This lower financial barrier to entry can make it more accessible for aspiring entrepreneurs and individuals with limited capital to become franchisees. 

What are the signs that an emerging franchise is succeeding? 

This can be tricky to answer. I think there’s a few factors involved. Firstly, the satisfaction of franchisees plays a pivotal role. Are the current franchisees happy? Are they getting along with the brand? Is their experience in line with the expectations they had before buying the franchise? 

Secondly, you can look at some of the quantitative indicators. That involves evaluating the financial performance of the brand. Are the franchisees profitable? Are they growing year over year? 

Lastly, the growth trajectory of the franchisees can also be a good way to assess how well the brand is doing. So you can look at whether there’s year-over-year expansion through increased same-store sales or the addition of new systemwide locations. I also like to see if the current franchises are adding more units. When existing franchisees show confidence in the system by investing in and opening additional territories, this can demonstrate the brand’s potential to establish itself as a category leader within the industry.

How important is it for franchisees to connect with their peers? 

I think establishing strong connections with fellow franchisees is very important for franchise owners, particularly with those who may be in similar business situations as them. In my view, this is one of the biggest advantages of being part of a franchise system. It provides a network of non-competitive peers who are willing to share their operating experience with you. 

Unlike independent business owners, who often lack a supportive community, franchisees can readily seek guidance from others who have likely encountered and addressed similar issues. 

FranTable plays a vital role in facilitating these interactions, enabling franchise owners from various brands and industries to engage in knowledge-sharing and ensure they are making informed decisions.

>> To learn more about Jaimeen Dalia and the ins and outs of operating a restaurant franchise, check out FranTable.

Restaurant Profit Margin

A restaurant’s profit margin is its profits as a percentage of gross sales. Healthy profit margins are critical to the success of any food service business and can be influenced by several factors. In this article, we’ll explain what profit margins are, what margins are common in the restaurant industry, factors that impact your bottom line, and how you can improve them.

What Is Restaurant Profit Margin?

Restaurant profit margin is a measure of a restaurant’s profitability. In essence, it’s the percentage of sales revenue that the restaurant retains as profit after accounting for all operating costs, including the cost of goods sold (ingredients), employee wages, rent, utilities, and marketing expenses. The equation for restaurant profit margin is below, with the resulting figure usually expressed as a percentage.

(Total Sales – Total Costs) / Total Sales

A higher profit margin indicates a restaurant pays less in expenses relative to its sales, as compared to its competitors. It’s important to note, however, that average profit margins can vary widely depending on the type of restaurant and location. For instance, a high-end restaurant in a prime urban location may have different profit margins than a fast-food outlet in a suburban area.

What Is Gross Profit?

Gross profit is the total sales revenue a restaurant generates minus its cost of goods sold (COGS). The COGS for a restaurant typically encompasses the direct costs associated with food and beverage production, including ingredients and labor involved in preparing dishes. This figure can be divided by a restaurant’s total sales and expressed as a percentage to show the gross profit margin.

However, gross profit and gross profit margin don’t account for other operational expenses like rent, utilities, marketing, or administrative costs. Although they’re less comprehensive than a restaurant’s total profit margin, gross profit margin provides good initial insight into operational efficiency before other expenses are considered.

How To Calculate Gross Profit

To calculate the gross profit of a restaurant, you first need to calculate your total sales revenue. Next, subtract the total costs of goods sold (i.e., ingredients and direct labor). The resulting figure is your gross profit.

For example, suppose a restaurant generates $10,000 in total sales in a month. Suppose the COGS for that month, which includes the cost of ingredients and direct labor, is $4,000. In that case, the restaurant’s gross profit can be calculated as follows:

Gross Profit = Total Sales – COGS

Gross Profit = $10,000 – $4,000

Gross Profit = $6,000

The gross profit for the restaurant in this example would be $6,000 for that month. This signifies the amount of money the restaurant has after accounting for the cost of producing the food and beverages sold before considering other operational expenses like rent, utilities, and marketing.

Taking the calculation further, we can calculate the restaurant’s gross profit margin by dividing its gross profit by its total sales ($6,000 / $10,000). In this example, the restaurant would have a gross profit margin of 60% for the month.

What Is Net Profit?

Net profit (also called the “bottom line”) is the final measure of a restaurant’s profitability after all expenses, both direct and indirect, are accounted for. This includes the cost of goods sold, along with operational expenses like rent, utilities, marketing, management salaries, and administrative costs.

How To Calculate Net Profit

Calculating net profit is relatively straightforward – simply subtract all of a restaurant’s expenses for a given period from its total sales revenue for the same period. The resulting figure represents the restaurant’s overall earnings for a specific time, after it covers all its costs. If the figure is positive, the restaurant made money for that period; if it’s negative, it spent more money than it made.

For example, let’s consider our restaurant from the above example. Let’s say that, in addition to its $4,000 in COGS for the month, it also incurred $2,000 in operational expenses, including rent, utilities, marketing, and salaries. The net profit can be calculated as follows:

Net Profit = Gross Profit – Total Expenses

Net Profit = $6,000 – $2,000

Net Profit = $4,000

In this scenario, the restaurant’s net profit for the month is $4,000. This is the amount of money the restaurant retains as income after all costs and expenses are covered. 

How To Calculate Net Profit Margin

To calculate net profit margin, divide net profit (total sales – total expenses) by total sales revenue. The resulting figure is typically expressed as a percentage (you can multiply it by 100 to get the percentage figure). It represents the percentage of sales a restaurant retained over a period rather than paying it out in the form of costs. The formula for the net profit margin is below. 

Net Profit / Total Sales

In our previous example, the restaurant’s net profit for the month was $4,000, and the total sales revenue was $10,000. The net profit margin can be calculated as follows:

Net Profit Margin = (Net Profit / Total Sales) x 100

Net Profit Margin = ($4,000 / $10,000) x 100

Net Profit Margin = 0.4 x 100, or 40%

The net profit margin for the restaurant in this example is 40%. This figure indicates that the restaurant retains 40% of its total sales as profit after accounting for all costs and expenses. The higher a restaurant’s net profit margin, the more profitable it is relative to its sales.

What Is the Average Restaurant Profit Margin?

The average profit margin for a restaurant can vary significantly depending on factors such as location, type of restaurant, and efficiency. Generally, the average profit margin for restaurants hovers between 3% to 10%. However, some highly efficient and successful restaurant models and those focusing on bar sales can achieve profit margins as high as 10% to 15%. 

Why Are Restaurant Profit Margins So Low?

Restaurant profit margins tend to be low relative to some other types of businesses due to several factors. Firstly, the food industry is characterized by high operational and overhead costs. Secondly, restaurants also face the challenge of pricing their menu items competitively while still making a profit.

This is further compounded by the fact that food and beverage costs are often subject to market fluctuations, making profit predictions difficult. Additionally, wastage of perishable goods, seasonal variations in sales, and the high level of competition in the industry also contribute to the slim profit margins. 

Finally, the restaurant industry faces much higher employee turnover than businesses in other industries. The costs associated with attracting, vetting, and training employees can be significant and reduce a restaurant’s profits if owners and managers can’t retain talented employees.

Average Profit Margins By Restaurant Type

Restaurant profit margins vary widely, largely due to the type of restaurant. Here are a few examples of typical profit margins for successful restaurants in several categories:

  • Full-service restaurant: The average profit margin of a full-service restaurant typically ranges between 3% to 10%. However, this can vary based on location, menu, quality of staff, and the overall dining experience.
  • Cafe: The average profit margin for a café typically falls between 3% and 8%.
  • Fast food restaurant: Fast-food restaurants average around 6% profit, but this can vary depending on whether the industry is a franchise and the type of food offered.
  • Food truck: Profit margins for food trucks can range from 10% to 20%, but this also depends on the type of cuisine offered, location, and overall operational costs.
  • Catering: Catering businesses can have higher profit margins, typically between 10% and 20%, due to their focus on events and parties rather than daily operations. They also often have reduced overhead, as they don’t need to maintain a restaurant facility capable of seating regular guests.

How To Improve Restaurant Profit Margins

In a competitive and dynamic industry such as food services, improving restaurant profit margins is a critical, ongoing task. Understanding where and how to increase revenue and cut costs can make the difference between a thriving establishment and a failing one. Here are some effective strategies to enhance your restaurant’s profit margins:

  • Manage your inventory. An optimal inventory management system minimizes waste and reduces unnecessary expenses. Regular inventory counts also help to identify any theft or other issues impacting stock levels.
  • Price menu items carefully. Make sure you understand the cost of each menu item and price it appropriately to achieve your desired profit margin for that item. 
  • Train employees on upselling and cross-selling. Staff training should include strategies for upselling and cross-selling, which can increase average transaction value. This could be as simple as suggesting additional items or promoting higher-priced dishes to customers.
  • Regularly review profit and loss statements. Regularly reviewing income statements helps restauranteurs identify trends, monitor the effectiveness of cost control strategies, and spot potential areas of improvement.
  • Reduce operational costs. Review your operations regularly to identify areas where you can reduce costs without compromising service quality. This could involve renegotiating supplier contracts, investing in energy-efficient equipment, or improving scheduling to match staff levels with demand.
  • Work on customer retention. It’s almost always cheaper to retain existing customers than to acquire new ones. Loyalty programs, exceptional customer service, and regular engagement with customers through social media and email marketing are all effective ways to increase customer retention and profits.
  • Handle payments electronically. Handling payments electronically is an effective strategy for improving restaurant profit margins for several reasons. Electronic payments streamline operations, reducing the time and labor associated with manual cash handling, and are more accurate, reducing errors in cash transactions that can lead to losses.

While many payments can be handled electronically through restaurant point of sale (POS) systems and banking apps, one notable exception is distributing employee tips. Kickfin can be instrumental in facilitating electronic payments from restaurants to their tipped employees. 

Kickfin provides instant, electronic tip payments, eliminating the need for cash on hand. This reduces the risk of theft or loss, saving restaurants from unnecessary financial drain. Schedule a demo with one of our experts to learn more about how Kickfin can help increase your operational efficiency and boost your profits.

Hot Tips & Takes w/ Greg Nasser: How to Avoid Becoming a Statistic

Meet Greg. 

As a veteran of the service industry, Greg Nasser has been a bartender, cooked, and eventually opened restaurants of his own. Over his long career in the industry, he noticed a common trend: restaurants often fail prematurely. And more often than not, failing restaurants seem to operate on intuition and impulse, rather than looking to the data.

That’s why he created Borne. At Borne, they’re focused on restaurant intelligence powered by AI and machine learning, with the goal of preventing premature restaurant closures. With data-backed insights, Borne provides restaurateurs with the tools and information they need to make the right business decisions and stay afloat.

What are the main reasons you see restaurants fail?

There are a lot of reasons that restaurants fail, but those reasons usually fall into one of two major buckets: wrong concept or wrong location. 

From the wrong concept side, a boring or forgettable concept in an already saturated market doesn’t make sense. There may be value perception issues — like a higher check average when there are 10 other burger restaurants that are all half the price. You need to understand what people want and need in a neighborhood, which is where tech can come in. AI allows you to pinpoint what people are searching for and offer them a concept that they want.

The other bucket is wrong location. In this category, a lot of restaurants fail because of a bad lease deal. Owners often find themselves signing an unfavorable lease based on unrealistic projections. People often overestimate the consumer value sentiment for their brand based on incorrect information or human intuition that isn’t complemented with data. That leads to failure because people don’t see value in your concept in the area. 

How are restaurants faring in 2023?

Restaurant closures overall are down in 2023 from 2022. But, first off, restaurant closures are not predictive of economic trends — they’re kind of a reaction to them. 

It’s a complicated question, because different service styles (counter service, drive-thru, full service) all have different metrics. You also have to consider differences between rural, urban, suburban, and destination restaurants. 

In the QSR sector, I know that they’re doing 30% better than they were prior to 2019. But in some urban sectors, restaurants in downtown corridors still haven’t recovered as well, especially in cities like San Francisco. 

Still, restaurants are definitely going in the right direction, and people are continuing to go out to restaurants and spend money and enjoy themselves. 

What are some of the blind spots for restaurant operators that can impact their success? 

If we’re talking about in-house operation, your biggest challenge is your prime costs. If you have a relatively fixed prime cost, you kind of know what your cost of goods will be. You can get into the theoretical costs of goods sold to control your cost there.

The one statistic that’s always evolving and changing is labor. With minimum wage increases, insurance increases, legality by city, by state forecasting and understanding how labor can impact your brand over a five-year window is really important. Labor is something that I think a lot of us take for granted. 

We also see owners having an idea and hoping to open a restaurant because they’re passionate about it. But does the data back up your idea? Where is the right place to open it? You have to plant seeds early on so that your restaurant can flourish. In the past, you would spend six months on R&D, standing outside of a location to see how many people are going to nearby restaurants and engineering the menu. That old-school methodology is pretty much out of use and only works if you really know the area. Otherwise you’ll get inaccurate information. 

The blind spot here is that we have data and AI tools that you can use to guide your human intuition, and that is invaluable for learning what customers will value about your cuisine and brand. You have to learn who your customer is and make sure it matches with your brand personalities.   

How important is real estate for the restaurant business? What can operators do to make your location successful?

I mean, it all starts with the location. So one thing to keep in mind is that when we talk about restaurant trip takers and market opportunity, restaurant trip takers will always buy brands that they feel are like minded. If they go to Whole Foods, Lululemon, Pete’s Coffee, then they’ll go to X Restaurant because it makes them feel like the other three.

From a real estate perspective, you need to understand how a brand should feel and how it should be presented to meet the restaurant trip-taker’s needs. That includes the right cuisine for the location. 

As I mentioned before, it’s also important to know what a reasonable lease deal is for your restaurant. I think a lot of restaurants fail because of unfavorable lease deals that leave no money on the bottom line. Usually this means they’re overpaying and underperforming. 

I think understanding revenue projection and matching occupancy budget for a specific address is really the key to the real estate piece. At the Borne Report, we help people get that and bridge the gap between real estate broker and restaurateur.

How can restaurateurs look more to data and AI rather than their own intuition to ensure that they don’t fail?

The Borne Report is a great resource to help guide human intuition. I don’t think AI should ever take away human intuition on the restaurant side, because the restaurant business is a human business dealing in a lot of human characteristics. 

When you look at the Borne Report in its totality, it gives you a really good understanding of cuisine recommendations, revenue projection, market profile of the restaurant trip taker, competitive landscape, and other key data. You also get an inside look into retail and restaurant trends and spend in that specific trade area around that address. It really saves that time that you would need to spend on R&D, allowing you to focus more on things that matter, like guest experience and design. 

You can think of the Borne Report as a way to guide your intuition but also as an insurance policy to avoid failing. 

What is the outlook for restaurants in 2024? What can restaurants do to stay on top?

Being versatile in service styles is important. Maybe you’re a counter service brand that offers dine-in with beer and wine. Or if you have a model that works well with adding drive-thru, breakfast, or late night, those can be beneficial depending on your location. That versatility will lead to faster growth and more success. 

Our models are also predicting that live music, farm-to-table, wine bars, and live fire will be huge trends in 2024. That experiential dining that we didn’t get during the pandemic is becoming more readily available and drawing people in. 

To learn more about Greg Nasser and data-backed restaurant recommendations, check out the Borne Report.