Want to know how much restaurant owners make? The answer is “it depends”, but I can give you a pretty good idea.
Restaurant owners can make anywhere from zero (or losses) to millions. How much money an owner can make by opening restaurant will vary mostly by the size and volume of the restaurant and how “hands on” and aggressive the owner proves to be.
Disclaimer: The information presented here is only from my informal life experiences as a business tax practitioner. I have done no official case studies and the information on this website is only meant as a general beginner’s guide for entertainment purposes only. Please do your own due diligence and research before investing time and money into a business. Your results may vary greatly from what I have observed in the past and you may lose money. Lots of it.
How Much Do Restaurant Owners Make – Size Matters
As a small business accountant and tax practitioner, I have many restaurant-owning clients. The restaurants they own and run range anywhere from “food truck” to “large sports grill”. Let me tell you right off the bat – it’s the big ones that do well – potentially REALLY well. Most medium sized restaurants do pretty good too, but the small restaurants and food stands? Not so much.
How Much Do Food Truck and Sandwich Shack Restaurant Owners Make
Clients with these smaller-sized restaurant businesses, as a group, are not really doing so well. Many of them make decent sales numbers, but after food costs, overhead, and payroll expenses, there is little money left for the taking. This has been true for the majority of cases.
It’s such a shame when I see $300,000 in sales for the year and $290,000 in expenses – and yes I see yearly numbers like this all of the time.
I always think to myself, “just a few tweaks and they could be doing better”, but I don’t know what those tweaks might be. Well, sort of I do, continue reading below where I discuss factors other than “size”..
Some of my small restaurant clients are doing better than this, but none of them are making a killing. I would say the typical high side would be about $60,000 in net profits per year. It’s really disappointing.
Surprisingly, these small businesses are somewhat capital intensive to start up too – making them fairly high risk for the profit potential.
How Much Do “Medium-Sized” or “Family” Restaurant Owners Make
Now we are getting Somewhere.
I have clients who own Chinese restaurants, Italian Restaurants, etc, and many of them are doing pretty darn good. Depending on other factors as discussed below, many of these clients are making decent money. I would now put $60,000 per year on the very low side, with average profits of about $120,000, and occasionally I see net profit numbers pushing $200,000 per year or more.
These restaurants are also expensive businesses to create from scratch. There is a lot of equipment that needs to be purchased, and food is expensive too. If you intent to start such a business, please do lots of homework on how much it might cost you to get started. To put it bluntly, you will need a crap-load of funds to get set up. Don’t say I didn’t warn you.
How Much Do Owners of Large Restaurants Make?
In my experiences, this is where the real money is.
But wait – before I talk about profits here allow me to mention risk. There’s always a catch. I don’t have enough actual data on how many of these big eating establishments fail in ratio to succeeding, but risk is something to consider before you set off to start a large-sized restaurant.
Starting this type of business is likely going to require very deep pockets, such as from an investment back or other source. The big food places for which I do taxes are mostly all partnerships – where the partners are each coming in with lots of capital.
The rewards are astonishing, however. The client P&Ls from these places show bottom lines of about $500,000 to $2,000,000 after expenses. Many of them have net profits of over a million dollars per year.
Yes, in my opinion and from what I have observed, you can make these kind of numbers with one of these big restaurants if you can figure out how to get one started. You also have to figure out how to handle one.
I’m thinking that food and labor management is a nightmare. You are just going to have so many entry level employees and food purchases to manage. I can’t help but think that these clients are “super-human” in some way. If you are not an absolutely stellar labor manager and time multiplier, you may not be up to this task.
Important Money Making Factors for Restaurant Business Owners
Are you ready to do what it takes to make good money from a restaurant? Here are just some of the things that it will take…
You have to be good at it. In most business this means not being afraid to raise your prices, but in restaurants, this can be tricky.
Remember the food truck that earned $300,000 in sales but had $290,000 in expenses? Is it possible that they could charge a bit more and turn the low profit margin into a larger one? Maybe. I don’t know. But you should learn if you plan to own a business like that.
Naturally, the ones who are really good at it will be on the higher end of the profit scale.
Restaurant Owner Involvement.
When you are not constantly present and actively managing everything, your employees will rob you blind and put out a lousy product. Every time. Sorry to talk poorly of people, but I see this time and time again and that’s how it is. If you are present and strong in the over-watch department, you will be on the better end of the money making scale. If you don’t show up, well then from what I’ve seen, good luck to you is all I can say.
Restaurant Owner Aggressiveness.
I’ve witnessed very involved and energetic owners who provide unlimited guidance to their employees to make sure that the service, final food product, and presentation is near-perfect on a consistent basis. They also apply unrelenting quality and price control tactics whenever they order food from the distributors.
An aggressive owner also must be constantly marketing to include new ways to find and retain customers. This effort involves many facets, such as constantly giving out free food or administrating coupon and promotional programs.
As aggressive as they are, these machine-like successful business owners never lose their cool when dealing with stressful situations involving customers, employees, and food distributors.
High-energy, aggressive owner-types will certainly be on the higher end of the success-to-failure ratio spectrum and they will see greater profits nearly every time.
In my college years, I used to work for a smallish Italian restaurant that had about 10 tables. The owner was (still is) an EXTREMELY aggressive owner when it comes to the above items. He had one more thing going for him too. Delivery. He would attack, attack, and attack all sources including hotels, offices, etc. with free food and menus. There were order fax-in order programs (high tech back then) and all kinds of marketing activities always going on.
He works VERY hard.
As a result, he was (and is to this day) totally off of the high end of the profit scale for a “medium” sized restaurant. He does everything right and has unlimited energy and patience.
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