The restaurant industry is growing at an exponential pace with the concept of cloud kitchens & multi-outlet quick-service restaurants opening up rapidly in metro cities. We’re being introduced to mainstream Pan-Asian cuisine, quirky concept cafes & exquisite new forms of desserts. All of this indicates that the restaurant industry is booming with new players entering the market and disrupting the industry and at the same time customers willing to give a chance to new offerings in the market. With the market growing, many are trying to get a piece of this growing industry with their restaurant venture and earn a profit.
Restaurant profit is a function of revenue and cost. Restaurant Profit = Gross Revenue – Total Cost. This simple equation is a great deal for all business owners. Ultimately, all business decisions are taken in order to ensure the survival of the business, earn a huge profit or aim for revenue growth or expansion. The profit & loss statement of your restaurant can give an accurate picture of the phase of your restaurant and help you in decision making. Find below a reference to a basic P&L statement of a restaurant.
New entrants to the market and rise of third-party aggregates have made the restaurant space highly competitive which has affected survival, profits and growth. So what all has changed in the past decade? Let’s take a look!
Margins in the restaurant business have gradually trimmed down due to multiple reasons. Below is the list of factors that have impacted the margins of restaurants:-
To penetrate the market by acquiring new customers, popular third-party platforms such as Swiggy, Zomato and UberEats have embedded the concept of discounts and freebies in the mind of all customers. Ergo, restaurants have to let go of important margins up to 20% just to acquire or retain customers via offers or loyalty programs. This has also ensured a high burn rate in the initial months for almost all new restaurants that are trying to make a space for themselves in the market.