What Restaurant Sales Are and How They Work
Restaurants, food trucks, bars and other establishments in the food industry rely on sales remain operational. But not all sales are created equally. There are four types of restaurant sales-
- Food sales- sales of food and beverages to patrons of the restaurant
- Take-out sales- sales of food to customer's taking out of the restaurant
- Catering sales- sales of food and beverages for catered events
- Dining-out sales- sales of food and beverages to customers of other restaurants
Each of these restaurant sales types has different drivers which result in differing strategies that will maximize revenues.
4 Types of Restaurant Sales
1. Food and beverage
4. Dining out
How to Manage Your Restaurant Sales
Managing restaurant sales is a difficult task for restaurant owners. What makes it more difficult is not knowing what costs are impacting sales figures. Knowing these numbers leads to smarter decision making.
Revenue management has been used for the hotel industry and airlines for many years. Some companies have seen increase up to 5% in store sales. The restaurant industry uses tools like the POS to gather sales data. This helps to create a more accurate picture of cost to sales analysis which will help predict future spending trends. For example, knowing whether full service or casual dining is doing more in terms of sales can influence decisions on pricing or menu planning to boost revenue.
How to calculate revenue for your restaurant business
Calculating the total revenue for a restaurant comes down to a combination of total sales that include all income streams. However, once the raw number is determined more data should be gathered. This means knowing how much revenue is assessed per table. Once these figures are known it can help better direct revenue management.
Restaurant sales are what keep establishments open
PLUM Point of Sale can help with your sales
Where Food and Drink Sales fit into the equation of Restaurant Sales
In the restaurant industry, food and beverage sales are the key to long term success. Retail and other store sales may have their place in some establishments but it is always the food and drinks which brings patrons to a restaurant first. Prices of products will be a reflection of how the food service sales are going.
Restaurant sales are tallied up by food and drink sales. As an example, when the restaurant industry accumulates $500 million in food sales, with $250 million in store sales for beverages, the overall restaurant sales would be $750 million.
Food Beverage Cost of Goods Consumed vs. Cost of Goods Sold
In the restaurant business, food and beverage cost of goods sold refers to a cost attributed to the restaurant sales of food and beverage sold to patrons. This is different from cost of goods consumed which is the cost of food preparation that isn't associated with corresponding sales.
The formula for Food & Beverage Cost of Goods Consumed looks like this-
Beginning Inventory + Purchases Ending Inventory = Cost of Goods Consumed
Where do non-food & drink sales fit into restaurant sales?
When the economy slows down, the restaurant industry like any other has to cut costs to stay afloat. Sales and marketing budgets are gone over with food service being top priority. Restaurant sales are usually split in three category types- food sales, beverage sales, and other sales. Each restaurant will have its own sales breakdown depending on whether it is casual dining or full service.
A thriving restaurant business can expect to see 75% of restaurant sales come from food service which includes beverages. The other 25% come from non-food and drink sales like retail items or gift cards. The ratio is small compared to food service sales but the non-food sales can still be impactful, especially in hard times.
Non-food and drink sales remain an important part of the revenue a restaurant business brings in. Overall restaurant sales can be increased by optimizing non-food store sales with the food beverage sales.
Statistics on Restaurant Sales
The restaurant industry can be difficult to be successful in if you own a restaurant business. However, even though working in food service can be challenging it can still be rewarding. The food service and restaurant industry employs over 13 million people with restaurant sales bringing in over $600 billion in revenue.
Statistics from The National Restaurant Association highlight trends in restaurant sales, the way owners of a restaurant business evaluate their sales reports, and overall profits within the restaurant industry.
Restaurant Sales Statistics
- As minimum wages increase for restaurant workers, menu prices have increased in over 65% of restaurants.
- 68% of restaurant business owners review store sales reports regularly. 45% review labor reports on a regular basis. 32% will review menu reports regularly but 17% admitted to not checking these reports regularly.
- A whopping 91% of restaurant business owners expected to see an increase in restaurant sales within the next few years.
- Success in the restaurant business comes with continued updates. Knowing this, 47% of restaurant business owners said they would initiate repairs or updates on equipment if they had extra income.
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Restaurant Sales as a Percentage of Total Restaurant Revenues
The last decade has seen significant changes within the restaurant industry. Restaurant sales as a percentage of total profit has increased. This means that take away food service is bringing in more revenue than either casual dining or full service restaurants.
Because the restaurant industry remains one of the most competitive it makes running a restaurant business an expensive endeavor. The National Restaurant Association estimates the average restaurant only generates a profit of 2% on revenues. This translates into a large sales volume to create a sustainable profit.
Restaurant Sales- The Cost of Doing Business
For restaurants to stay in business the restaurant sales need to generate enough revenue to cover the costs of the restaurant itself. Here are the three main costs of running a restaurant-
- Food- Purchases of food are the main expense every restaurant faces. A good rule to follow is to keep food costs under 32% of total food sales. If more is being spent, purchasing practices should be reconsidered. This could mean making a different deal with the food supplier or finding a new one. Using a food cost formula to manage purchases will keep costs down.
- Labor- The second most impactful expense for restaurant owners is labor. These are the payments made to the staff. Most restaurants will want to keep payroll costs from exceeding 25% to 30% of food sales. If more is spent paying the staff it will reduce the overall profit.
- Equipment- A restaurant cannot operate without the proper equipment making this a significant expense, especially when first opening. Be prepared to spend an upfront cost for various items like stoves, freezers, dishwashers, and various other gadgets. These will likely need upkeep or replacement over the years as well. A mistake most new restaurant owners make is overspending by purchasing top-of-the-line equipment. A better option would be to visit second-hand shops who provide very good equipment at half the cost.