Enough Already! 3 Things About Restaurant Profits You Need to Hear

Enough Already! 3 Things About Restaurant Profits You Need to Hear

How are the profits in your restaurant? Great? Amazing? Is it your best year ever or are your profits on life support? Wherever you are now, it can be said that you want more. It’s human nature to want to climb to the top. 

The restaurant business can be very brutal on people at times especially when it comes to the area of making money. How do you beat the odds and maximize your profit potential? Here are 3 things that are getting in the way of you and your profits:

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Is The Food Delivery Industry About to Burst?

Is The Food Delivery Industry About to Burst?

Some believe the business model of the restaurant/delivery market is not sustainable, simply because companies like Grubhub, Seamless, and UberEats are venture capital-backed upstarts. This means these delivery-based companies currently have money being funneled in to stay afloat, while it produces upside-down margins.

Why upside-down margins, you ask?

Let's take a closer look at UberEats, for example. This company “is only profitable in 27 of the 108 cities where it’s offered — meaning they are actively losing money in approximately 70 percent of their markets. That’s with Uber taking 30 percent to 40 percent of every order from the restaurant and charging the customer a $5 delivery fee,” according to “Recode.”

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Why Chefs Are Turning to Other Revenue Streams Than Restaurants

Why Chefs Are Turning to Other Revenue Streams Than Restaurants

By Kerri Adams, Editor-at-Large

As if the average 5-6 % profit margin wasn’t tough enough for restaurant operators, the minimum wage increase to $15 means restaurants will be even less profitable.

Many operators have argued that an increase like this would not only be detrimental to their business, but the employees would ultimately suffer with weekly hour cuts and even may lose their job entirely. 

“The cost of doing business is just crazy,” said Hugh Acheson, Top Chef judge and chef, while on a panel at the recent Food & Wine Classic event. 

With that in mind, even super star chefs are struggling with these thin margins.

Acheson’s fellow panelist Tom Douglas, a restaurant mogul in Seattle with 18 restaurants decided to drop tipping at all of his restaurants. Instead, there is a 20% service fee which helps to cover FOH and BOH costs. With the $15 minimum wage, it will cost Douglas $5 million more just this year for his 850 employees.

“If we only had restaurants we would be out of business,” said Douglas on the panel. “The restaurants would not be able to sustain this hit.”

Where the Real Profit is

So that’s why these chefs who have been able to develop themselves as their own brand, are exploring other revenue streams like e-commerce and cook books.

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