When planning to open a restaurant, it's easy to get dollar signs in your eyes thinking about the check totals adding up at the end of every service — especially when you factor in mega-profitable alcoholic beverages. But the food service industry is notorious for having very high operational costs, which often leads to thin profit margins.
Incoming revenue is great — but profit margin is what truly shows the long-term success and viability of a business, making it one of the most important metrics for restaurant success.
To track your restaurant’s profit, create a profit and loss (P&L) statement, use a restaurant profit margin calculator, or regularly check the built-in financial reporting page of your POS or accounting system.
But how do you know if your restaurant profit margin is good? Here are the profit margin ranges for different types of restaurants to help you benchmark your own restaurant's financial health.
Restaurant profit margin benchmarks
As you make projections and try to budget for your restaurant operating expenses, it’s good to have a benchmark for how profitable you might be. Let’s break down some average profit margins for different types of restaurant businesses.
Full-service restaurant profit margin
For a full-service restaurant, operators can expect the business to make anywhere between 0 and 15% profit, with the average restaurant profit margin landing around 5% – 10%, depending on your source. This is a recent industry benchmark accounting for rising labor and supply costs, but different types of restaurants can expect to bring in more or less profit.
How to improve full-service restaurant profit margins:
Do a menu audit and cut unprofitable, unpopular menu items — it boosts profit and may minimize food waste, which also helps reduce costs.
Negotiate with vendors or shop around for better deals.
Train front-of-house staff to gracefully upsell customers. DoorDash also provides built-in upsell features that allow customers to modify or add-on to orders for an extra cost.
Increase prices on your best-sellers — not by a lot, but even small increases will add up with highly ordered items.
For cocktails, train servers to upsell to top-shelf liquor — and reign in over-pouring to optimize beverage profitability.
Fine dining restaurant profit margin
Though big-ticket menu items may increase average check size, the higher expenses that come along with fine dining restaurants mean that they tend to sit in the same range as other full-service restaurants: a 5% – 10% profit margin. These restaurants are also often located in trendy areas of major cities, paying enormous rents.
Fine dining businesses provide attentive, hospitable service by employing lots of servers, sommeliers, bussers, and more, and have large kitchens full of cooks working with high-quality, high-cost ingredients. Use the profit-conscious advice above to improve margins at your full-service restaurant.
Fast food restaurant profit margin
Average fast food restaurant profit margins are around 6-9%. Their simple menus mean that ingredients are often used for multiple menu items, so there’s less waste and orders can be made in bulk. They also staff fewer employees than full-service restaurants, meaning their labor costs are lower.
How to improve fast food profit margins:
Reduce hours of operation — if you’re open 24/7, but aren’t getting enough orders between 2–10 am, it’s not worth it to have employees working that shift.
Audit combo pricing and ensure they’re priced to appeal to customers while bringing in maximum profit.
Offer Restaurant Rewards to connect your rewards and loyalty programs under a single platform, so customers can earn and redeem points whether they're ordering in-store, online, or on the DoorDash app.
Fast casual restaurant profit margin
Fast casual restaurants, or quick-service restaurants (QSRs) are able to operate more efficiently than fine dining restaurants. The average QSR profit margin is now around 17% — which is higher than full-service restaurants because they generally employ fewer employees, and they may have simpler, more profitable menus with lower ingredient costs. Shake Shack reported 20% profit margins in May 2023 and expects even higher margins for this fiscal year.
How to improve fast casual restaurant profit margins:
Train counter service staff to upsell, including offering combos, drinks, or dessert items.
Create profitable lunch specials that appeal to nearby office workers — and promote them on social media.
Regularly review vendors and make sure you’re getting the best deal on every ingredient.
Food truck profit margin
Food truck profit margins are 6-9%, on average — also higher than full-service restaurants. The big savings that leads to this higher margin is that they have way lower location costs. Restaurants spend an average of $6,000 a month on rent, so avoiding that huge expense by operating out of a food truck yields higher profits. Food trucks can take the same approaches for improving profit margin as fast-casual restaurants, and consider partnering with other local vendors to expand their reach.
Coffee shop profit margin
The average coffee shop brings in only a 2.5% profit margin. Even though the profit margin on coffee beverages is typically extremely high, it’s still very expensive to run a cafe, from paying staff to maintaining equipment and paying rent on a prime foot traffic location. And these expenses are hard to recuperate with a relatively small average check size.
How to improve coffee shop profit margins:
Boost average check size with snacks like pastries, fruit, chips, and cheese.
If you make drinks in various sizes, train staff to upsell and price larger drinks in a way that’s more profitable to you, but still worth the jump for customers.
Catering profit margin
High-end caterers charge premium prices for their exceptional food and service, along with their reputation and brand, so they can bring in up to 15% profit margin. However, the average catering business brings in between a 7-8% profit margin, which is still pretty good for the food service industry. Though business can be highly seasonal, caterers have more flexibility in pricing, menu, and costs, making it easier to turn a profit.
Pizzeria profit margin
Pizzerias have an average profit margin at the top of the range for all restaurants, hovering around 15%. Pizza, like other carb-forward entrees like pasta or rice bowls, is a high-profit menu item made of very low-cost ingredients. Combine the profit power of pizza with its massive popularity and you have a recipe for a solid business model — especially because they often meet customers where they are and offer takeout, delivery, and dine-in service.
How to improve pizzeria profit margins:
Create a seamless online ordering experience with Online Ordering — which lets you offer commission-free pickup and delivery ordering through your own channels, including your website, native apps, social media, and Google page. There are no monthly fees for the software; instead, you pay payment card processing fees of 2.9% of the total transaction amount + $0.30 per order.
Route all customer call-in orders to live agents who are trained to politely upsell customers, or a customized automated messaging system so you never miss a phone order, with Phone Ordering.
Ghost kitchen profit margin
Ghost kitchens, or virtual kitchens, are delivery-only restaurants with no onsite space for dining or takeout. This model allows for a wide range of overhead savings: they need fewer staff members, as there’s no front of house, and they can be located in an area with cheaper rent, as foot traffic isn’t a factor. Virtual kitchens take orders via website ordering or delivery marketplaces like DoorDash, and reach customers all over their area.
That’s why these businesses are on the higher range of profit margin — ghost kitchens operate at an average of 15% profit. They can even operate multiple concepts out of one commercial kitchen, meaning they can cast a wider net and reach more customers.
To increase ghost or virtual kitchen profits, invest in branding, social media, and advertising, and run promotions for popular holidays and local events. Take advantage of DoorDash's built-in marketing tools, such as Sponsored Listings and Promotions.
Bakery profit margin
Bakeries sit in a similar range as restaurants, even though there’s a very big range among different types of bakeries — including commercial bakeries, cake bakeries, coffee shop bakeries, pastry bakeries, and more. However, the average profit for bakeries is 4%, with the most successful bakeries bringing in up to 9%.
Bar profit margin
While bars may come with some challenges that restaurants avoid — like regularly dealing with unruly patrons — the profits are often worth the later nights. Bars have an average profit margin of 10-15%, thanks to the high markup on alcoholic beverages and the fact that they often run without a kitchen, which means they can forgo a back-of-house team. Pubs fall in this same 10-15% profit margin range, whereas wine bars are less profitable, ranging from 7-10%, because of the high cost of specialty wines that keep customers coming back. Nightclubs, on the other hand, are even more profitable: clubs have an average profit margin of 15-20%, thanks to high alcohol sales.
Types of restaurants with the highest profit margins
The restaurants with the highest profit margins are ghost kitchens and pizzerias. Ghost kitchens have much lower overhead costs, and benefit from built-in advertising on delivery marketplaces which promote their business for them.
And pizzerias combine a super-popular meal with multiple ordering channels — in-house dining, delivery, and pickup through online ordering and third-party marketplaces — to consistently bring in new customers with different ordering habits.
Tips for running a profitable food business
There are two strategies to boost your restaurant profit margin — increase sales and reduce costs:
Increase sales by meeting customers where they are. With Online Ordering, you can let customers order online without paying commissions or monthly fees — just payment processing fees. This helps you boost revenue and reach more customers with minimal impact to your budget.
Reduce costs on ingredients by negotiating with vendors, optimizing your menu, and keeping it small. Review your menu sales regularly and only offer the most profitable and popular dishes. Additionally, pay employees well and provide benefits that retain staff — it’s an upfront cost, but keeping employees happy reduces costly turnover. For more tips, read our blog post on reducing restaurant costs.
Track your metrics and boost profit with new revenue channels
Create a P&L sheet with this template and track the success of your restaurant — and if you’re looking looking for a brandable online ordering solution that makes it easy to grow sales across your own channels, try Online Ordering.
