What should My Restaurant ‘s Operating Costs be?
There is a never-ending debate about what percentages should a food business maintain in order to be profitable. With the added pressure of government-enforced minimum wages, more regulations and taxes, the restaurant business is getting tougher each year to squeak-out a profit.
Finding industry standards is easy to do, just Google them and you’ll find a horde of opinions but no real back-up from real operating restaurants and bars. But this article isn’t about quoting other opinions or statistics; rather it is about presenting the reader with actual results from dozens of restaurants.
As a restaurant broker, I review hundreds of restaurant and bar financials each year. I see first hand how restaurants perform. Of course this isn't a scientific analysis or study; rather it’s a compilation of real restaurant owners who have come to me to review and value their business. The names of the restaurants of course are confidential.
As a note, the industry is notorious for not reporting all the revenues, but certainly reporting all the costs plus more. So these percentages are likely overstated. In other words, if an owner reports 90% of his or her sales, then the percentage are higher than reality. For example, if actual sales are $100 and reported sales are $90 and food costs are $30, then the reported cost of sales percentage is 33.3% while the real cost of sales is 30%.
These percentages represent one working owner, meaning there is one owner working in the restaurant and no other family members. These numbers are from tax returns and reported to the IRS.
|
Restaurant Type |
Food |
Labor |
Rent |
Prime Costs |
|
21+ Bar |
27.9% |
25.8% |
10.2% |
53.7% |
|
American Comfort |
29.4% |
37.5% |
9.6% |
66.9% |
|
American Comfort Food |
37.3% |
16.7% |
2.5% |
54.0% |
|
BBQ |
47.8% |
17.6% |
10.9% |
65.4% |
|
BBQ |
35.0% |
17.3% |
8.5% |
52.3% |
|
Breakfast/Lunch Diner |
33.3% |
32.9% |
9.9% |
66.2% |
|
Casual Full Service |
25.1% |
26.9% |
8.0% |
52.0% |
|
Family American |
30.5% |
28.4% |
4.9% |
58.9% |
|
Fast Casual Italian Pizza & Pasta |
31.2% |
36.2% |
2.3% |
67.4% |
|
Fine Dining American |
37.3% |
35.4% |
3.8% |
72.7% |
|
Fine Dining American |
31.2% |
33.8% |
9.1% |
65.0% |
|
Fine Dining American |
27.4% |
19.0% |
3.3% |
46.4% |
|
Fine Dining French |
25.1% |
30.4% |
4.8% |
55.5% |
|
Fine Dining Italian |
25.1% |
19.4% |
8.7% |
44.5% |
|
Fine Dining Spanish |
26.6% |
31.7% |
6.7% |
58.3% |
|
Fine Dining Spanish |
43.0% |
10.2% |
5.5% |
53.2% |
|
Fine Dining Spanish |
49.3% |
25.0% |
3.0% |
74.3% |
|
Fine Dining Mexican |
18.9% |
35.0% |
9.3% |
53.9% |
|
Franchise Bakery |
25.1% |
34.8% |
11.4% |
59.9% |
|
Franchise Burger Dining |
31.2% |
24.4% |
10.7% |
55.6% |
|
Franchise Pizza |
31.6% |
24.6% |
2.9% |
56.2% |
|
Franchise Pizza |
30.8% |
13.0% |
2.9% |
43.8% |
|
Pizza Restaurant |
26.4% |
28.1% |
4.4% |
54.5% |
|
Pizza Restaurant |
35.6% |
22.3% |
13.6% |
57.9% |
|
Pizza & Pasta |
27.8% |
27.1% |
8.4% |
54.9% |
|
Franchise Sub Shop |
34.3% |
15.6% |
13.0% |
49.9% |
|
Full Service Traditional Mexican |
25.2% |
39.2% |
7.8% |
64.4% |
|
Full Sevice Restaurant & Bar |
34.5% |
17.3% |
9.3% |
51.8% |
|
Large Sports Bar |
30.2% |
23.0% |
14.4% |
53.2% |
|
Latino Quick Serve |
20.8% |
33.0% |
12.7% |
53.8% |
|
Office Complex Cafe |
34.4% |
23.4% |
10.4% |
57.8% |
|
Quick Serve Upscale Burgers |
26.2% |
28.7% |
13.1% |
54.9% |
|
Restaurant & Lounge |
29.0% |
30.9% |
9.2% |
59.9% |
|
Restaurant & Sports Bar |
31.6% |
38.6% |
6.8% |
70.2% |
|
Sports Bar |
30.1% |
16.1% |
12.0% |
46.2% |
|
Sports Bar |
30.6% |
26.0% |
6.6% |
56.6% |
|
Sports Bar |
29.8% |
18.0% |
9.2% |
47.8% |
|
Sports Bar & Restaurants |
34.9% |
33.3% |
10.3% |
68.2% |
|
Sports Bar and Restaurant |
30.5% |
34.1% |
14.7% |
64.6% |
|
Steakhouse High-End |
30.6% |
27.2% |
10.8% |
57.8% |
|
Sub - Salads - Pasta |
26.0% |
34.7% |
5.2% |
60.7% |
|
Upscale American Bar |
28.3% |
32.9% |
3.5% |
61.2% |
|
Upscale Asian Fish |
29.0% |
33.6% |
6.4% |
62.6% |
|
Upscale Cal-Italian |
31.5% |
26.0% |
6.1% |
57.5% |
|
Upscale Casual Dining |
26.9% |
23.5% |
6.0% |
50.4% |
|
Upscale Italian |
28.7% |
37.7% |
5.5% |
66.4% |
|
Upscale Italian |
32.4% |
22.0% |
8.3% |
54.4% |
|
Upscale Mexican |
27.7% |
36.7% |
7.2% |
64.4% |
Are you interest in getting your restaurant valued? Or perhaps you're thinking of selling? SellingRestaurants is a professional restaurant brokerage firm helping hundreds of people each year sell their restaurant across the United States. Give me a call at 800.576.3615 and let's talk!
Mel Jones
CEO & President
Paramount Restaurant Brokers, Inc.
Mel Jones is one of the premier restaurant brokers in the nation having published hundreds of articles on buying and selling a restaurant and bar business, selling thousands of restaurants in CA., WA and AZ and building one of the most copied business models in the brokerage industry. Mel started SellingRestaurants in 2004 with the one simple concept, give the buyers the information they need to make intelligent buying decisions without being pestered by a broker or hiding information, prepare the business for market by researching key details that make or break deals and educate the buyer on the buying process to create an intelligent buyer. Prior to SellingRestaurants, Mel was a Chief Financial Officer for Universal Music Group, the largest music company in the world. There he participated in more than $11.5 billion of merger and acquisition transactions. He also work for top companies such as Nestle Foods, USA. He hold a Bachelors in Business Administration Finance as well as attended Law School at Gonzaga University. He is a volunteer coach at Westlake High School track and field specializing in shot put and discus.