A restaurant might win awards, have loyal customers, and be well-reviewed, but at the end of the day, profitability is what keeps the doors open. The best restaurants don’t just deliver exceptional experiences—they actively manage costs, drive revenue growth, and optimize operations for long-term success.

In this guide, we’ll walk you through practical strategies to increase restaurant profits, from restaurant profitability analysis and cost management to effective menu pricing strategies and revenue drivers.

1. Know Your Numbers: The Foundation of Restaurant Profitability

A profitable restaurant starts with understanding its numbers. Staying on top of key restaurant cost metrics like prime costs, overheads, and profit margins is essential for survival and scalability.

Start with a Pro Forma Budget

A pro forma budget projects your revenue and expenses over a specific period, enabling you to plan effectively. Use historical P&L statements and adjust for:

• Leaner months versus high-volume periods.

• Seasonal ingredient price changes.

• Scheduled maintenance or equipment upgrades.

  
  

For optimal restaurant profitability, aim for a profit margin of 15-20%. Allocate 60-65% of your budget to prime costs—the sum of Costs of Goods Sold (COGS) and labor. The remaining 25% should cover overheads like rent, utilities, and marketing.

Prime Cost: COGS (Cost of Goods Sold)

COGS refers to the inventory used during a specific timeframe. Smart pricing and menu engineering (see Section 4) allow you to control this key profitability metric.

Formula:
COGS = (Inventory Used + Spoilage) ÷ Total Revenue

An ideal COGS is around 30%, but this varies depending on your restaurant type and operational goals.

Prime Cost: Labor

Efficient labor cost management often comes down to retaining well-trained staff. Loyal employees can upsell menu items, ensure smooth operations, and deliver excellent customer experiences.

According to the National Restaurant Association, the average restaurant loses $150,000 yearly due to staff turnover. Invest in your employees with training, promotions, and rewards to reduce turnover and boost efficiency.

Overheads

Fixed costs like rent, utilities, and marketing can’t be avoided but can be optimized. For example:

• Use energy-efficient equipment to reduce utility bills.

• Buy non-perishable supplies in bulk to save on costs.

Leverage Marketing for ROI

Don’t treat marketing as an afterthought. Oddle’s low cost restaurant reservation system can help save costs while helping reduce no-shows, improve cash flow, and boost profitability.

2. The Five ‘Sauces’ of Revenue Growth

Growing your revenue isn’t just about attracting more customers—it’s about optimizing every interaction. Successful restaurants improve these five revenue drivers:

1. Number of Customers: Attract new diners through online marketing and loyalty programs.

2. Frequency of Purchases: Encourage repeat visits with promotions and personalized offers.

3. Average Order Value: Use upselling, bundling, and menu engineering (explored in Section 4).

4. Restaurant Occupancy: Maximize seating arrangements for efficiency.

5. Table Turnover Rate: Streamline operations to serve more covers per shift.

These drivers are multiplicative, meaning even small improvements in each can significantly increase total revenue.

3. Make Your C.A.S.E.: Capture, Aggregate, Segment, and Engage Your Customers

Customer retention is the backbone of restaurant profitability. Studies show that increasing retention by just 5% can boost revenue by 25-95%. Oddle helps restaurants manage customer retention with a data-driven ecosystem.

Capture and Aggregate

Consolidate customer data using tools like Oddle’s Payment Terminals, QR Ordering, and Reservation System to build a 360-degree customer view.

Segment

Segment customers into two main groups:

• Active customers: Identify loyal diners and high-potential returnees.

• Inactive customers: Target those who haven’t visited in a while.

Engage

Create tailored campaigns for each segment:

• Offer discounts or rewards to re-engage lapsed customers.

• Reward loyal diners with perks like exclusive offers or early access to new menu items.

4. Profitable Restaurant Menu Strategies

Upselling and Add-Ons

Train staff to suggest add-ons, like sides or toppings. A simple upsell, such as adding fries to a burger, can significantly increase average ticket sizes.

Self-Service Ordering

QR Ordering Systems can increase average ticket sizes by 20% while improving operational efficiency. Customers often spend more when ordering digitally.

Bundling and Set Menus

Create combo deals and prix-fixe options to offer value while managing inventory more effectively.

Loyalty Programs

Loyalty programs are a proven way to drive repeat visits and build long-term relationships with customers. Oddle Loyalty makes this effortless by seamlessly integrating across your operations, whether it’s reservations, online orders, or in-store visits.

With Oddle, you can:

• Capture diner data through check-ins or online orders.

• Offer personalized rewards like discounts or free items.

• Design flexible programs tailored to your brand, from tiered rewards to instant discounts.

Menu Engineering and Pricing

Analyse transaction data to identify high-margin dishes and highlight them on your menu.

Psychological Pricing

Leverage pricing psychology to influence customer behaviour. For example:

• Use ".99" or ".90" price endings to make items seem more affordable (e.g., $13.90 feels cheaper than $14).

• Bundle profitable items into combo meals to create perceived value while maintaining margins.

5. Real Estate: Physical and Digital

Your restaurant’s real estate isn’t just its physical space—it includes its digital presence. Managing both effectively can significantly impact your profitability.

Physical Real Estate
Maximise your restaurant occupancy and table turnover rate with tools like Oddle’s reservation system, which includes customisable floor plans and a prepayment feature. Prepayments reduce no-shows, helping you hit your service cycle targets.

Digital Real Estate
In the online space, your marketing spend acts as your “rental.” Oddle’s Marketing as a Service (MaaS) optimises your digital real estate with targeted EDMs and social media advertising. These efforts ensure your brand captures attention and drives traffic, both online and offline.

Conclusion

Profitability in the restaurant business requires a combination of cost control, smart menu strategies, customer engagement, and leveraging technology. By implementing these actionable tips and using Oddle’s tools for integrated operations, you can optimize your restaurant for growth and long-term success.

Looking to grow your restaurant? Discover Oddle’s all-in-one solutions today!