RestauNax Logo
PricingAffiliate
Operations

Restaurant Profit Margins: Industry Benchmarks & How to Improve Yours

Restaurant profit margins typically range from 3-9%. Learn what's normal for your restaurant type, how to calculate your margins, and proven strategies to improve profitability.
RestauNax Team
RestauNax TeamContent Team

January 12, 2026

15 min read

Restaurant Profit Margins: Industry Benchmarks & How to Improve Yours

Let's talk about the number that keeps restaurant owners up at night: profit margin.

The restaurant industry is notorious for thin margins. While tech companies enjoy 20-30% profit margins, the average restaurant operates on just 3-9%. One bad month can wipe out a quarter's profits.

But here's the good news: understanding your margins—and knowing how to improve them—is entirely within your control.

What Is Restaurant Profit Margin?

Profit margin is the percentage of revenue that remains after all expenses. There are two types:

Gross Profit Margin

Revenue minus cost of goods sold (food and beverage costs).

Gross Profit Margin = (Revenue - COGS) / Revenue × 100

Example: ($100,000 - $30,000) / $100,000 = 70% gross margin

Net Profit Margin

Revenue minus ALL expenses (the money you actually keep).

Net Profit Margin = Net Profit / Revenue × 100

Example: $6,000 / $100,000 = 6% net margin

Restaurant Profit Margin Benchmarks

By Restaurant Type

Restaurant TypeAvg Net Profit MarginRange
Fine Dining3-5%0-10%
Full-Service Casual3-6%0-9%
Fast Casual6-9%3-12%
Quick Service (QSR)6-9%3-15%
Food Trucks6-9%3-12%
Ghost Kitchens10-15%5-20%
Pizza Restaurants7-10%4-15%
Coffee Shops7-12%3-18%
Bars10-15%5-20%

By Revenue Level

Annual RevenueTypical Net MarginNotes
Under $500K2-5%Struggling to scale
$500K - $1M4-7%Getting efficient
$1M - $2M5-9%Economies of scale
$2M+7-12%Optimized operations

Industry Average

The typical restaurant makes 3-6% net profit margin.

That means for every $100 in sales:

  • $28-35 goes to food costs
  • $25-35 goes to labor
  • $20-30 goes to operating expenses
  • $3-6 is profit (if everything goes right)

Understanding Your Cost Structure

The Restaurant Cost Breakdown

Cost CategoryTypical % of RevenueTarget Range
Food Cost28-35%25-32%
Beverage Cost18-25%18-22%
Labor Cost25-35%25-30%
Rent/Occupancy5-10%5-8%
Utilities3-5%3-4%
Marketing2-5%3-5%
Insurance1-2%1-2%
Supplies1-3%1-2%
Technology1-3%1-2%
Other Operating2-5%2-4%
Profit3-9%7-10%+

Prime Cost: The Critical Metric

Prime cost = Food Cost + Labor Cost

Prime Cost %Assessment
Under 55%Excellent
55-60%Good
60-65%Average
65-70%Concerning
Over 70%Critical—take action

Target: Keep prime cost under 60% of revenue.


The Hidden Profit Killer: Delivery App Commissions

Here's something most profit margin discussions ignore: delivery app commissions are destroying restaurant profitability.

The Real Math

Scenario$30 OrderNet to Restaurant
In-house order$30$30 (100%)
Direct online order$30$30 (100%)
DoorDash (25% commission)$30$22.50 (75%)
UberEats (30% commission)$30$21.00 (70%)

Impact on Profit Margin

Let's say your restaurant:

  • Does $50,000/month in sales
  • 40% comes from delivery apps
  • Apps charge 27% average commission
MetricWithout AppsWith Apps (40%)
Total Revenue$50,000$50,000
Delivery App Sales$0$20,000
Commission Paid$0$5,400
Effective Revenue$50,000$44,600
Net Margin (6%)$3,000$2,676
Margin After Commission6.0%5.4%
Annual Profit Loss-$6,480

Delivery apps don't just take 27% of delivery orders—they effectively cut your total profit margin by 10-20%.

💡 What If You Could Keep That 27%?

The math is brutal: on thin 3-6% margins, losing 27% to delivery apps makes profitability nearly impossible. RestauNax's zero-commission platform lets you keep 100% of every order—instantly improving your margins by eliminating your biggest profit killer.

See How to Improve Your Margins →

Strategies to Improve Profit Margins

1. Menu Engineering

Analyze every menu item for profitability and popularity:

CategoryPopularityProfitabilityStrategy
StarsHighHighPromote, highlight
PlowhorsesHighLowRaise price, reduce portion
PuzzlesLowHighBetter placement, train staff
DogsLowLowRemove or reimagine

Quick wins:

  • Remove or reprice bottom 10% of items
  • Highlight top-margin items visually
  • Train staff to suggest high-margin items
  • Bundle low-cost items with premium dishes

2. Reduce Food Costs

StrategyPotential Savings
Negotiate with suppliers5-10%
Reduce waste2-5%
Smaller portions on low-margin items2-3%
Seasonal menu changes3-5%
Cross-utilize ingredients2-4%
Better inventory management2-5%

3. Optimize Labor

StrategyImpact
Better scheduling5-10% labor reduction
Cross-train employeesImproved flexibility
Automation (AI ordering, etc.)10-20% labor reduction
Reduce overtime3-5% savings
Improve retentionLower training costs

4. Increase Average Check

TacticTypical Increase
Suggestive selling10-15%
Appetizer promotions8-12%
Dessert upsells5-10%
Premium options5-8%
Combo/bundle pricing10-15%
Beverage pairing suggestions8-12%

5. Eliminate Hidden Costs

Hidden CostSolution
Delivery app commissionsDirect ordering platform
Credit card feesNegotiate rates, cash incentives
Utility wasteEnergy-efficient equipment
Food wasteInventory management
OverportioningStandardize recipes

📊 Save $180,000/Year—With One Switch

You just read 5 strategies to improve margins—but eliminating delivery commissions has the biggest immediate impact. Restaurants switching to RestauNax save an average of $180,000 annually in commission fees. That's not a margin improvement—it's a margin transformation.

Calculate Your Commission Savings →

The Delivery Commission Problem (And Solution)

What Delivery Apps Really Cost

Commission TierWhat They TakeOn $500K Delivery Sales
15% (basic)$75,000/year
20% (standard)$100,000/year
25% (plus marketing)$125,000/year
30% (premium)$150,000/year

Converting Delivery Customers to Direct

Every customer you move from delivery apps to direct ordering:

  • Saves 15-30% commission
  • Gives you customer data
  • Allows direct marketing
  • Builds your brand
Conversion RateAnnual Savings (on $500K)
25% to direct$18,750 - $37,500
50% to direct$37,500 - $75,000
75% to direct$56,250 - $112,500

Profit Margin Calculators

Quick Net Profit Calculator

Net Profit = Revenue - (Food Cost + Labor + Rent + All Other Expenses)
Net Margin = Net Profit / Revenue × 100

Break-Even Calculator

Break-Even Sales = Fixed Costs / (1 - Variable Cost %)

Example: $15,000 fixed costs / (1 - 0.60) = $37,500/month needed

Ready to Improve Your Restaurant's Margins?

Restaurant margins are thin—but they don't have to be. Join thousands of restaurant owners who've boosted profitability by eliminating commission fees and capturing every order.

0%
Commission vs 27% avg
$180K
Average annual savings
+4%
Typical margin improvement
Start Improving Your Margins Today →

💰 Transform Your Restaurant's Profitability

The brutal truth about restaurant profit margins:

Most restaurants barely survive on 3-6% margins. Meanwhile, delivery apps take 15-30% of every order. The math doesn't work—unless you take control of your ordering channels.

The Real Path to Better Margins

❌ Low-Margin Reality✅ High-Margin Strategy
Delivery apps take 27%Keep 100% of orders
No customer dataOwn your customer relationships
Generic marketingTargeted, profitable campaigns
Manual processesAI automation
Reactive pricingStrategic menu engineering
Working harderWorking smarter

RestauNax: Built for Restaurant Profitability

RestauNax helps restaurants improve margins by eliminating the biggest profit killer: commission fees.

Direct Impact on Your Margins:

  • $0 Commission - Keep 100% of every online order
  • AI Phone Ordering - Capture missed calls (20-30% more orders)
  • Customer Database - Market directly, reduce acquisition costs
  • AI Menu Builder - Professional menus without design costs
  • AI Food Photography - Save $500-2,000 on photo shoots

Margin-Improving Features:

  • Menu Analytics - Identify your stars and dogs
  • Customer Segmentation - Target high-value customers
  • Automated Marketing - Drive repeat business efficiently
  • Upselling Tools - Increase average check
  • 26+ Free Tools - Including Menu Profit Calculator

The Numbers:

MetricBefore RestauNaxAfter RestauNax
Delivery commission27%0%
Missed phone orders25%1%
Customer retention20%35%
Average order value$28$34
Net profit margin5%9%+

Real Restaurant Results:

  • $180,000+/year saved on delivery commissions (avg)
  • 35% increase in direct orders
  • 23% higher average ticket
  • 3x growth in customer database

→ Get Your Free Demo

Tags:
restaurant profit margins
restaurant profitability
food cost
labor cost
restaurant finance
restaurant management

About the Author
RestauNax Team
RestauNax Team

Content Team

Expert content team with decades of combined restaurant industry experience.