In the restaurant industry, there are a number of tried-and-tested and creative new ways to increase your profit margins.
So, if you’re interested in bringing new customers through the doors, or in getting existing customers to spend more or visit more often, this guide should give you insight into what you can do to increase your sales.
From renting your venue out for private events to offering a seasonal menu, there are multiple research-backed strategies you can use to run a successful restaurant.
1. Evaluate and optimize your menu
Stop and take a good hard look at your current menu. Is it massive? Does it have any sense of organization? Can you easily identify which items are entrees and which are appetizers?
Your menu should be strategically built to encourage a purchase. It should have a structure that’s easy to navigate and promotes items that you want patrons to purchase. Typically this means mixing and matching price points, popularity, and niche items to make a final decision easier.
In some cases, this may mean decreasing the amount of available food and drink options. Or it may require you to circulate your food offerings in a seasonal menu to develop artificial scarcity around more popular but costly products. Only you know what sells best, what brings in the most revenue, and what is simply a sunk cost. It’s up to you to determine and test what blend of those categories will appeal to your customers.
If you host your menu online (and you really should) you may need to sacrifice descriptions or even truncate your menu to focus even more so on ease of use. You can’t simply upload a grainy photocopy of your paper menu and expect results. Instead, you need to focus on speed and little to no decision making. Feature images, brief descriptions, and clear categories that simplify navigation and make purchasing online easier.
2. Expand your services
Thanks to our current crisis, the need for additional restaurant services has become a necessity. Sure, online ordering and delivery were already becoming more and more popular, but when you can’t offer or only have minimal dine-in seating, you need to create more options. Long story short, if you’re not offering delivery or pick-up you should at least look into implementing one or both options.
For pick-up, just designate a few spaces in your parking lot exclusively for those types of orders. Have a clearly marked in-store pick-up area and an employee to verify everything is ready when a customer arrives.
For delivery, you can test out the potential sales value using services like UberEats, Grubhub, or Postmates. Over time, it may make more sense to eventually grow your own delivery fleet but to start it’s likely more cost-effective to leverage an existing ecosystem.
If you don’t end up using a service, you’ll need to consider implementing an online ordering system. It’s time-consuming and not customer friendly to deal with payment over the phone or in-person after taking a pick-up order. Simplify the process by integrating a payment portal within your website and make your optimized online menu that much easier to convert into sales.
Circling back to your menu, you shouldn’t offer everything for delivery or takeout. Choose items that are easy to prepare and will arrive in a presentable state. You may also want to focus on just offering your best selling or your most profitable offerings. There are additional overhead and incremental costs you’ll need to consider, and items with a slim margin may not be sustainable.
3. Sell complimentary items
Every business, no matter the industry, product, or service should look to increase their customer lifetime value (CLV). The CLV is the amount of money a customer will spend on your business over the course of their relationship with you. This can actually be over their lifetime, just a few years or months, and in some cases just a single visit.
For restaurant owners, you want to focus on providing exceptional customer service and food quality to keep customers coming back. But at the same time, you want to try and maximize the CLV of each customer for every visit. And the best way to do that is by selling complimentary products.
Appetizers, deserts, mixed drinks, signature brews, or any other drink or plate that doesn’t involve an entree can be seen as complementary. Your approach to how you use these items will differ based on your entree pricing. You may offer some appetizers for free or at a discount if they purchase a drink or even multiple entrees. Or it may make sense to create a combo that can be purchased at a discounted price.
Whichever route you take, just remember that you’re looking to sell volume. You’re increasing the value for the customer while also increasing the value of the customer.
4. Carefully maintain inventory
It’s incredibly easy to let your inventory costs get out of hand, especially for restaurants. Since most of your inventory has a shorter shelf life, there’s always the concern that things can go bad. There’s a delicate balance that must be achieved between having enough to satisfy demand and not over-purchasing. If you’re regularly running out of product or having to throw away out of date produce, you need to get a handle on your inventory.
In many ways, maintaining inventory is like maintaining your business finances. You need to carefully forecast what demand will look like in the next day, week, or month and then compare that to the actual results. Luckily restaurants are somewhat cyclical and you can typically look at past sales to get a rough estimate of what to expect. But, you need to be cautious about blindly trusting these numbers.
When forecasting sales, pay attention to current conditions. A big day last year may not immediately mean that you’ll see a record sales day at the same time this year. Maybe there was a local concert or football game that saw an increase in foot traffic and that’s not happening at the same time this year.
Look at the weather, local events, promotions from other restaurants, and the overall market to help bring into context what could drive or deter sales. These are assumptions, and you may find that not every factor directly affects your business. But the more you pay attention and compare forecasts to actual results, the more accurate your inventory purchasing will be.
5. Start a loyalty or reward system
We mentioned the concept of extending the lifetime value of a customer. While the first point focused more on the need to do this during a single visit, you should also find ways to get customers to come back. High-quality food and service aside, a loyalty or reward program is another good option.
Luckily a reward program doesn’t have to be complicated. The simplest method is utilizing a punch card that builds up to a free item of your choice after a certain number of sales. If you want to be a bit more modern, you can offer membership cards that you track through your POS system. The benefit of opting for a more technical option is that any promotions or free items can be directly sent to a customer’s inbox, along with other communications.
Just remember to choose the discounted and free products you provide carefully. You want it to be valuable to the customer, but it doesn’t really make sense to give away more costly meals. Instead, opt for appetizers, desserts, drinks, and anything else that creates a minimal impact on your bottom line.
6. Host events
Hosting events in our current climate isn’t really possible, but it should still be something you consider. Under normal circumstances, events are a great way to bring in new and regular customers alike. It can be something simple like a discount on drinks to come and watch the big game or even a partnership with other local brands to provide a unique experience. Just consider your clientele and target audience when considering what types of events you’ll be hosting.
Now, with dining in being incredibly limited due to COVID-19, that doesn’t mean you can’t host digital events. Maybe you livestream a cooking class or menu reveal, or even bring exclusive products directly to your patrons. Companies like 2 Towns Ciderhouse, which typically participate in an annual Cider Summit in Portland, OR, instead partnered with other cidermakers to deliver tasting kits to customers in place of the event. They then hosted a virtual party for participants to discuss and enjoy the limited release ciders together.
Right now, people are craving interactions and a sense of normalcy from their favorite shops and restaurants. Finding unique ways to create and host events safely can be a great way to do just that while increasing your sales.
7. Establish branded revenue streams
It’s no secret that customers love branded merchandise. From stickers to sweatshirts and even glassware, there’s no shortage of options. If you aren’t already, now may be a great time to start offering your own branded swag.
Keep in mind that this will require some upfront investment. In many ways, you’re starting somewhat of a new business and should approach the implementation carefully. Vet vendors, chat with customers, and forecast the potential costs to determine if launching additional products makes sense for your business.
You may even want to start with a limited run of products to validate customer interest. Having a smaller quantity ensures that you don’t overspend and can even encourage customers to buy. From there, review how the initial launch went and decide if producing more or another line of limited apparel/merchandise makes sense.
8. Encourage employee growth
One area that can have a dramatic impact on the success of your sales efforts, is your employees. They’re the face of your restaurant and can easily derail any initiatives if you don’t treat them as such. The best thing you can do is make them part of the decision-making process and offer growth and training opportunities, as well as incentives.
For new services and menu items, focus on developing their upselling techniques. Work through scripts, menu ideas, and descriptions to find what works as the best and most effective opportunity when talking with customers. Additionally, this is a great opportunity to find out what does and doesn’t sell directly from your employees, helping you further refine your menu.
Another area to encourage employee participation is maximizing your table turnover rate. While some of this is reliant on speed in the kitchen, simplifying your menu, and embracing modern technology — successfully increasing the number of customers you serve primarily depends on your staff. Work with them on optimizing your restaurant layout, ensure that enough of your team is available and working to serve customers quickly, and work with them on anticipating customer needs to make their time enjoyable while still encouraging them to finish.
It can be an intensive process, but including your employees and caring about their personal growth is typically a sure method of improving sales. Not only does it make them care more about your business but it gives them a stake in that success as well.
9. Increase prices
Increasing prices may seem like a bad move, but it’s all about how you do it. If you gradually adjust prices over time to accommodate rising operational costs, it won’t be such a shock for your customers. If you wait and implement massive price hikes without additional services or upgrades to accommodate such an increase, you’ll likely lose customers.
Go back to your forecasting efforts and plan any price increases in advance. Review your inventory costs and determine which products are more expensive and require a price increase to still be sustainable. If you can, maintain the same price on less expensive items when you adjust prices, to make the transition more palatable for your customers.
If price increases don’t make sense for you, especially if you’re in a rough economic climate, it may make more sense to just eliminate menu items or products that aren’t bringing in revenue. Removing them may come as a disappointment to certain customers, but it’s better to eliminate items rather than having to shutter your doors entirely.
10. Focus on local marketing efforts
How much are you spending on advertising? Do you know how effective your marketing efforts are? Are you targeting the right people? You hopefully know the answers to all these questions, and if any of them aren’t positive, it may be time to readdress your marketing efforts.
There are plenty of affordable marketing tactics you can implement for your restaurant, but we’re going to focus on going local. If you’re paying for digital ads, tv and radio spots, or even billboards — location matters. It doesn’t make sense to be paying for ads that reach people in a different state or country, because the likelihood they will ever actually visit your restaurant is incredibly low.
In both your traditional and digital advertising, focus on promoting your business locally. Geographically target an area that’s within a certain distance of your restaurant. Partner or advertise with local schools, papers, or other organizations that are within your community. As you grow, you can look to slowly expand your reach but to get the most out of your ad dollars, start with those closest to you.
Ready to turn a profit?
While this is by no means a complete list, by offering some of these money-making services, you’ll be off to a good start when you do start your restaurant business.
If you’re not sure about launching a restaurant just yet, consider starting with a food truck. It’s more affordable, and it’s a good way to figure out what items you should put on the menu when you do finally open up shop.
In the meantime, happy planning!
Editors’ note: This article was originally published in 2016 and updated for 2020.