How Much Money Do Restaurants Make?

When it comes to the restaurant industry, the question of how much money restaurants make is a topic of great interest. As with any business, understanding the financial realities and profit margins is crucial for both aspiring and established restaurateurs.

Key Takeaways:

The current national average restaurant profit margin is 10.66%, though estimates can vary from as low as 3-6% to as high as 12% depending on the measurement methodology.
For every £100 in revenue, restaurants typically keep between £3 and £7 in profit. This highlights the thin margins that characterise the industry.
Profit margins can vary significantly by restaurant type, with higher-margin categories including bars, pizzerias, fine dining, and cafés/coffee shops, and lower-margin categories like fast food and casual dining.
High operational costs, such as cost of goods sold (COGS) and labour, are the primary drivers of low profitability in the restaurant industry.
Highly franchised quick-service restaurant (QSR) systems can achieve significantly higher profitability of around 25%, with industry leaders like McDonald’s reaching 50% EBITDA margins.

The National Average Restaurant Profit Margin

According to industry data, the current national average restaurant profit margin is 10.66%. However, this figure can vary depending on the source and measurement methodology. Some estimates suggest a range of 3-6% for net profit, while others put the average between 10-12%. As a general rule of thumb, for every £100 in revenue, restaurants typically retain £3 to £7 in profit.

To illustrate this, a restaurant generating £10,000 in daily revenue with a 10.66% profit margin would earn approximately £1,066 in daily profit. Over a five-day-per-week operation, this would scale to around £278,000 in annual profit.

Profit Margins by Restaurant Type

The profit margins in the restaurant industry can vary significantly depending on the type of establishment. Some of the highest margin categories include bars (10-15%), pizzerias (10-15%), fine dining and cafés/coffee shops (10-15%), and breweries (10-20%).

In the mid-range are categories like fast casual and quick-service restaurants (QSRs) (6-9%), food trucks (6-10%), catering companies (7-8%), and cafés and bakeries (8-12%).

At the lower end of the spectrum are fast food (2-6%), casual dining (3-6%), buffets (5-8%), and full-service restaurants (3-5% or 0-5% for fine dining). The service model, menu complexity, labour costs, and overall operational efficiency are key factors influencing these variations in profitability.

Why Restaurant Profit Margins Remain Thin

The primary drivers of low profitability in the restaurant industry are the “Big Three” expenses: Cost of Goods Sold (COGS), Labour costs, and Overhead. These three elements typically consume the majority of a restaurant’s revenue.

High operational costs are the fundamental reason why restaurant profit margins remain thin. Factors contributing to this include complex menus, service models, higher labour requirements for full-service operations, and rising supply costs.

The Most Profitable Restaurant Models

While the restaurant industry as a whole tends to operate on thin margins, certain business models have proven to be more profitable. For example, ghost kitchens benefit from lower overhead costs and built-in advertising through delivery marketplace promotions.

Highly franchised QSR systems can achieve profitability of around 25%, with industry leaders like McDonald’s reaching an impressive 50% EBITDA margin as of mid-2022. In comparison, franchised restaurant systems can achieve nearly triple the profitability of lightly franchised or 100% corporate-owned locations.

Restaurant Brands International, the parent company of Burger King, Tim Hortons, Popeye’s, and Firehouse Subs, maintains a 35% profit margin, while Shake Shack reaches 20% profit margins as of May 2023.

Conclusion

The restaurant industry is characterised by thin profit margins, with the current national average standing at 10.66%. However, the specific profit margins can vary significantly based on the type of restaurant, service model, and operational efficiency. While the industry faces numerous challenges, understanding these dynamics is crucial for both aspiring and established restaurateurs to make informed decisions and drive profitability.

Sources:
Owner.com – Average Restaurant Profit Margin: How to Grow Yours
SpotOn – Restaurant Profit Margin: 7 Ways To Actually Move the Needle
ChowNow – Average Restaurant Profit Margins: What They Are And How to…
DoorDash Merchants – What is the Average Profit Margin for Different Restaurant Types?
Aaron Allen – Restaurant Profit Margin: The Ultimate Guide
Skynova – 6 Most Profitable Types of Restaurants in 2026
Lightspeed HQ – The Complete Guide to Restaurant Profit Margins
Restaurant365 – What is the Average Profit Margin for a Restaurant?
National Restaurant Association – Bottom line impact of rising costs for restaurants
CSI Market – Restaurants Industry Profitability by quarter, Gross, Operating and…