How Much Do Restaurant Owners Make? Are They In Profit or Loss

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Most of us have a mindset that restaurant owners make a huge surplus. This might be due to the posh-looking interior and infrastructure. So, today this article will be an ultimate guide on whether the restaurant owner makes a profit or losses. 

restaurant

There are various expenses such as remuneration, marketing, advertising, wages, and operating costs. But there are unknown hidden expenses incurred by the restaurateurs that cost a fortune, such as occupancy expenses, licensing, technology, etc.

Here is a list of various expenses borne by the restaurant owners.

Expenses Incurred By Restaurant Owners

There are plenty of expenses borne by the restaurant owners. These expenses are unavoidable for the smooth working and functioning of the restaurant. 

These expenses include staff salaries, cost of goods sold, advertising and marketing, infrastructural cost, repairs, maintenance, and many more.

These expenses would eventually result in maintaining the goodwill of the restaurant directly or indirectly. 

The below-mentioned points describe the major expenses incurred by restaurant owners in detail. 

1. Staff Remuneration And Labor Wages

working staff

Staff remuneration includes the salary, expenses, wages, receipts, and paycheck stubs with paychecks. Wages are given on a daily basis to the staff, such as for loading or unloading of carriage. 

Salaries are fixed amounts given to the working staff, whether full-time or part-time. Paycheck stubs are the document that accompanies paychecks.

A paycheck stub is a document issued by an employer that describes an employee’s gross earnings, deductions from those earnings, and net pay. 

Restaurant Owner’s Salary Range: $40,000-$100,000+ Annually

Labor Cost Percentages Range: 28%-35%

2. Cost Of Goods Sold

food items

Food and beverage costs are the second largest expenses incurred by restaurant owners. These expenses include beverages, different types of edibles, etc.

The major amount of profit is spent on the cost of goods. To maintain good relations with customers, it is important to serve them quality food.

Incurring the food cost helps the restaurant retain more and more customers. 

Casual Café Food Cost Percentage: 25%

Average Restaurant Food Cost Percentage: 35%

Steakhouse Food Cost Percentage: 40%

3. Operational Cost 

cooking equipment

Operational cost includes the expenses related to the kitchen equipment, linens, dishes, and glasses.

It also involves the laundry cost of linens, tablecloths, and napkins. For smooth functioning, it is important to spend on quality products to avoid depreciation at a faster rate. 

Small Restaurant Operations Costs: $10,000 Initially

Large Restaurant Operations Costs: $100,000 Initially

4. Maintenance And Repairing 

maintenance

The maintenance and the repairing expenses include all those expenses which are essential to keep the restaurant operating.

These can be categorized into the maintenance needs of the building itself, the dining area, the kitchen, and the food preparation and cleaning equipment.

5. Marketing And Advertising Expenses

marketing and advertisement

In the modern era, marketing and advertising are now considered separate entities. Owners nowadays spend a lot on the restaurant’s marketing by paying media companies, advertisements, promotions, and many more. This will cost restaurants. 

People are using social media to market their restaurants which helps them to earn more customers.

Adding a couple of hundred dollars per month to a staff member’s paycheck stubs to run your restaurant’s social media could be your best option for low-cost marketing.

Local Low-Budget Marketing Costs: $1,000 Annually

Outsourced Agency Marketing Costs: $30,000 Annually

6. Daily Administrative Cost

administrative cost

The administrative costs of a restaurant are identical to those incurred by other business entities.

These expenses include office supplies, telephone charges, postage, and fees to professionals such as accountants and lawyers. 

7. Real Estate Occupancy Expenses

occupancy cost

This expense is a category divided into all those aspects related to the restaurant’s physical building. This can include property taxes, rent, insurance, and utilities.

It also includes such things as signage and any parking fees or expenses the restaurant might incur. Rental space is a better option than starting from scratch.

Smaller Restaurant Rent/Building Fees in an Unpopular Area: $40,000 Annually

Large Restaurant Rent/Building Fees in a Popular Area: $150,000+ Annually

8. Insurance And Licensing Fees

insurance

Insurance and licensing are also other important expenses incurred by the restaurants. To save from damages and to get paid for losses or damages, insurance saves restaurants from getting diminished. 

Licensing is an important factor that an owner must own to reduce losses and extra fine charges charged by the government.

 For instance, Restaurants also must pay a number of licensing fees to local health departments and for beverage licenses if they serve alcohol.

Music now becomes a common thing in restaurants. For this, the owners must pay license fees for the right to the music. 

Fast Casual Dining Music Licensing Costs: $500 Annually

Large Restaurant Venues with Live Entertainment Music Licensing Costs: $2,500+ Annually

Music Licensing Penalty Fees: $750-$30,000 Annually

Business License Cost Range: $75-$7,000 Initially

Food Handling License Cost Range: $100-$1,000 Initially

Liquor License Cost Range: $300-$14,000 Initially (based on state).

9. Technology Cost

technology

It is impossible to think about working in a restaurant without the involvement of technology. Technology is involved, from basic things to heavy equipment.

Inventory management and mobile POS systems are important to add to the worth of the restaurant. POS costs can run anywhere from $100 to $400 per month. 

10. Décor And Remodeling Cost

décor of restaurant

Creating the correct ambiance in your restaurant may cost much. The decor is important to add value to the restaurant.

For some restaurant owners, the process of buying new equipment, furniture, and décor can cost hundreds of thousands of dollars. 

Décor and remodeling costs for a small existing restaurant: $5,000 Initially

Décor and remodeling costs for a large new restaurant: $100,000+ Initially

Conclusion 

It is mandatory to check on the expenses and maintain proper records of surplus and deficits. 

These expenses would not affect the profit-earning ratio of the restaurant only when these expenses are properly managed and organized by professionals. 

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