What is Margin?

The term margin means the amount of money from revenue that is left after certain costs are paid. It is a profit ratio and a measure of profit efficiency. Restaurants and other foodservice operators should be aware of the following types of profit and loss margins and the implications they have on their business.

For instance, gross margin generally includes the cost of goods sold (COGS), like food and beverage products and ingredients. Net profit margin is more comprehensive and shows the “bottom line” profit after all expenses, taxes, and fees.

Why Margin Matters for U.S. Restaurant Operations?

Margin matters even more for decision-making in restaurants and foodservice, since it is the path to profitability and the basis for the long-term viability of the operation. Operating margin for restaurants is historically narrow, with net profit margins generally falling between 3% and 10%, depending on concept, market, and cost of doing business.

Modern POS and Restaurant Management solutions offer real-time sales, costs, and margins information that enable managers to make informed decisions. Consistently monitoring and enhancing margins over time enables restaurant managers to improve financial performance and ensure consistent profitability in a highly competitive U.S. market.