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Opening a Restaurant: How to Manage Your Costs to Maximise Profit

Opening a restaurant can be daunting, so we’ve put together a basic guide to help you manage costs and maximise profit.

Opening a restaurant is much like starting any other business. There are many factors that contribute to costs and overheads—including wages, rent, food & beverage, and insurance—but the sole purpose is to maximise revenue and ensure that your ROI has you coming out on top and not out of pocket.

It can be daunting, so we’ve put together a basic guide on how to structure your costs to drive sales and increase profit. 

Sure, we might not be financial experts per se, but we do understand the costs involved in opening a restaurant and running a hospitality venue; so let us share a little bit of our wisdom with you. Remember costs can vary between business types (bars, restaurants, cafes, etc.) but these are overall averages based off statistics from the ABS.

The costs to consider when opening a restaurant

Wages 👩🍳

Wages cover everything from hourly pay, penalty rates and payroll taxes to superannuation and leave entitlements. Now, these may not all apply to your particular business, but they’re all important considerations when opening a restaurant. 

How much you spend on wages will be impacted by square footage of the venue and your service type—are you a self-service, order at the bar or table service-kinda venue? As a rule of thumb, wages should be kept at 40 - 45% of total revenue.

Remember to factor in the costs of a provider to help you with tax and compliance, any uniform you are providing and any software or platform you’ll be using; for example a roster scheduling tool or team communication platform.

Food & Beverage 🍸 

This is the soul of any restaurant and if there is one thing that maximizes ROI, it is the quality of your F&B, as this leads to returning customers and word-of-mouth marketing. Once again, F&B costs depend on the venue; bars will spend less on food than restaurants and cafes; but will spend more on alcohol. You want the fridge to be full, but you don’t want to over-order. It’s a balance that’ll take some getting used to. Generally, food costs should sit at around 35% of total food sales. 

Utilities 📋

This takes into account things like rent and insurance; while also factoring in overheads like lighting, sound systems, water bills, internet and phone bills and electricity and gas bills; all of which you may not have considered when thinking about opening a restaurant. These costs should sit at around 15 - 20% of your total sales. 

So, what does this mean for you?

Based on the rough guidelines above, opening a restaurant and managing your costs correctly can leave you with a profit of up to 10% of gross revenue, with the average profit margin sitting at 4.2%. Not bad for your first rodeo!

It’s important not to cut corners when it comes to any of the above; we’ve all seen how well that goes (insert George Calombaris with a side of unhappy, underpaid employees and a media frenzy). 

However, this doesn’t mean that there aren’t things venue owners can do to streamline their costs, optimise their food offerings and increase sales when opening a restaurant.

How can Mr Yum help?

We’re glad you asked! Using a mobile order and pay system like Mr Yum gives you the opportunity to see purchase patterns via user-friendly report functions. This means minimising food waste by cutting underperforming dishes while also giving customers what they want by paying attention to what is selling. 

Not to mention, the Mr Yum visual menu sees 20 - 40% higher average spend per head—an average increase we’ve seen across all our venues. We know, that’s a lot! This means allowing your staff to focus on providing the ultimate hospitality, while also increasing total sales and ultimately getting more $$ into your pocket. 

Want to know more? Find out why thousands of businesses are using Mr Yum to maximise their profits.