Profit margin says a lot about how business is doing. At its most basic, profit margin determines whether you’re hemorrhaging money or if you have the reserves to install that shiny new advertising campaign you’ve had your eye on for months.
There are two types “profit margin” to keep your eye on. Gross profit margin compares sales to the cost of everything that goes into making food. Net profit is much more relevant toward building a better business because it captures all of your expenses, not purely sales.
Net Profit Margin = (Revenue – All Costs) / Revenue
5% profit margin is a low, 10% is average, 20% is considered good. Most full service restaurants average a net profit margin around 11%, so if yours follows similar trends from quarter to quarter then you know you’re on the right track.
To adjust net profit, consider all of your expenses and revenue sources—not just the costs that directly contribute to making food.
Increase Sales
One way to improve profit margins is to find to draw in more money, whether through bolstering existing revenue streams or opening up new channels for profit. Online ordering, for example, has gotten extremely popular in recent years but particularly as a direct result of COVID-19. With rampant quarantine measures, more people shut themselves indoors and order delivery instead. Online ordering provides an 11-20% increase in sales that usually falls on the more profitable side of the spectrum; taking a chance on new revenue streams, if you haven’t yet, is a smart choice for restaurants who want success in 2021.
Loyalty programs also go hand in hand with promotions and special deals which encourage guest engagement with your social media and in person. Rewards programs can increase sales up to 30% particularly when used in conjunction with smart advertisements and limited-time offers.
Menu engineering and revitalization can assist here; guests should see mouth-watering pictures and your best dishes front and center to draw their eye as soon as they open the menu. eatOS has designed Point of Sale systems with easy menu customization to match your brand aesthetic and show off the best you have to offer. Don’t underestimate the importance of your menu: It’s the main draw to your restaurant and absolutely has an impact on what customers buy, how much they spend and whether they decide to come back.
Reduce Costs
Alternatively you can better your profits simply by reducing costs from various areas of business. Remember, your expenses total more than what it takes to bring your menu to life: Use eatOS analytics and reporting features to get a closer look at all of your data points so you can make smarter decisions, big and small. For example, review in-depth sales data and know to reorganize your menu to prioritize certain dishes, reduce portion sizes, assess inventory needs and more.
Food waste actually accounts for a significant portion of unnecessary expenses each year. Your customers likely leave leftovers on their plates that only a few take home, and inventory discrepancies turn sour when ingredients spoil. Keep an accurate count of your stock, get reordering reminders, and use reporting features to see whether you need to reduce or increase your bulk orders—all from a smarter PoS.
You should also Take time each half year or so to touch base with your vendors and see whether you can’t negotiate a price reduction in general, when you order in bulk or with early payment. The importance of your vendor relationships cannot be overstated: Diversification along the supply chain is a powerful source of cost reduction in the industry. Find merchants who specialize in certain in-season ingredients who offer cheaper prices, and additionally find yourself with backup plans in case there’s interruptions higher up the supply chain that puts your orders in hold. With multiple vendors as an outreach option, your business doesn’t have to suffer. Use referrals from other restaurants in the area to find good deals or link up together for discounts when you group your orders together. Competition can be your greatest asset when you team up rather than act as rivals. Innovation happens when we work together.
eatOS Point of Sale has other advanced features that bring it to the cutting-edge of modern restaurant technology. For example our workforce management features make it easier than ever to handle your staff and direct their energy productively: Our interface is very simple to learn so training is easy, and if you combine technology designed to simplify daily tasks with a safe and supportive work environment, you’ll see employees naturally flourish and stick around, reducing high turnover expenses.
Combine WFM with pay-at-table technology that customers adore. Payment methods have advanced as far as everything else, and now tap-to-pay and mobile wallet options are more popular than ever before. Customers enjoy the ease of paying quickly without having to fumble for their wallet or count out bills; contactless transactions also result in less fraud and better table turns so it’s a valid consideration for any restaurant looking to reduce costs simply by increasing tableturn times and minimizing labor expenses as a result.
Better Profit Margin Management
Whatever route you choose, whether you increase sales or find a way to reduce overall expenses, restaurant technology and the industry as a whole will continue to evolve, and you need to be prepared to meet every challenge. Do you want reservation management software that will help open a new revenue stream or to start catering services while quickly calculating what you need to charge to offset the cost of rent? eatOS can do that. Our devices are built to make you flourish.
Being aware of the latest trends also means optimizing characteristics of your business that prioritize flexibility. Adapting to new trends as they arise is a core component of the food service industry this year as everyone struggles to adapt to changing state reopening policies and fluctuating consumer trends that change direction as swiftly as legal protections against this dangerous virus. Manage your profit margin the smart way: Book a demo with eatOS today and start your 2021 off with better restaurant management.
