5 Tips to Increase Your Restaurant’s Profitability
⚡ Speed Run Notes
- Most restaurant profitability advice focuses on cost cuts and ignores the revenue side, which is where the real asymmetry lives. A 5% cost cut is a one-time gain with a hard floor. A 5% experience improvement compounds across repeat visits for years. Owners who only cut costs end up with a cheaper version of the same struggling business.
- The profitability lever most owners ignore is check size per table, not table turnover. Faster turnover has a ceiling (kitchen speed, dish capacity, customer comfort). Larger check size has no ceiling if the experience justifies it. Upgrading what's on the table is more leveraged than hurrying the people at it.
- CD4 (Ownership) turns one-time customers into regulars, and regulars are the most profitable guests. A regular requires no acquisition cost, orders with confidence, brings friends, and tolerates small mistakes. Every hour spent turning a first-timer into a regular is worth more than any marketing dollar.
- Service quality is the most under-priced line item in the industry. Great service creates dessert orders, wine recommendations, and five-star reviews. Cheap service saves $5/hour and costs thousands in forgone upsell. Cutting service labor to hit margin targets is the profitability mistake most owners eventually make and regret.
- The deepest profitability move is building a restaurant that people feel lucky to be at. Luck is CD7 (Unpredictability) + CD1 (Meaning). When diners feel they are experiencing something special, they spend more, tip more, and return more. The entire industry's profit margin lives in that one word — lucky — and few owners optimize for it deliberately.
The question that every restaurant owner has on their mind is simple: how can I increase the profitability of my restaurant?
While there are some blatant ways to accomplish this, such as cutting back on food quality and paying your workers less, these are not ideal solutions. Those would be considered cutting corners.
There are many ways for a restaurant to increase profitability as well as foot traffic. Here are 5 tips that we feel every restaurant owner should consider:
Author Credibility: Yu-kai Chou
Yu-kai Chou created the Octalysis Framework after studying gamification since 2003 — years before the term entered mainstream vocabulary. As a Human-Systems Architect & Behavioral Designer, his framework has been applied by LEGO, Microsoft, Porsche, Coca-Cola, Salesforce, and MrBeast, impacting over 1.5 Billion Users.
Chou has taught the Octalysis methodology at Harvard, Stanford, Yale, Tesla, Google, BCG, and IDEO.
His work has been cited by Harvard, Stanford, MIT, Forbes, Wall Street Journal, Wired, US Department of Energy, NIST, NSF, NCBI, US Department of Education, ClinicalTrials.gov, and Google Scholar — with 3,700+ more academic publications. Explore his books here.
1. Social Media
We’ve mentioned it before, but we’ll mention it again. Social media can be daunting and scary, but at the same time it can be an effective marketing tool for a business.
By using social media as a communication tool, you can build relationships that keep your business top of mind with potential customers.
By using it as a brand monitoring tool, you can listen to what people are saying, both good and bad.
When used effectively as a whole, social media has the potential to help a restaurant increase its brand awareness and most importantly, its profits.
2. Email Marketing
We mentioned how social media can be a great tool for staying in touch with customers, but another effective strategy is email marketing campaigns.
By collecting and building out email databases of customers that have dined in your restaurant, you will be able to market to them special dining opportunities, new menu items, and even a special dessert for their birthday.
Here is an example of how Fleming’s Steakhouse sends out creative email campaigns during seasonal holidays and events:
3. Menu Pricing
Rather than making ‘gut feeling’ calls on how to price your menu items, consider using data-driven tips on how to set menu prices that are accurate and most importantly competitive.
Remember that setting your prices to be reasonable doesn’t mean that you are sacrificing profitability.
4. Local Searches
Aside from word of mouth referrals and passersby, another way that customers find what restaurant to eat at is through local searches online.
Restaurant owners should take the time to look up what information is available on their business when searching for key terms related to it.
Often, potential customers will be able to look up menu prices and items, locations, and reviews on a business. Make sure that what is online accurately reflects your business. (It would be embarrassing if the address for your restaurant was listed incorrectly.)
Google is a great place to start your search about your restaurant:
5. Focus on Creating Repeat Customers
Repeat customers are the lifeline of many restaurants. Not only do they dine at a restaurant on a regular basis, but they often tell their friends, which can lead to more revenue.
Because of their importance, restaurant owners should consider the value in creating a loyalty program for its customers.
By creating a loyalty program, a business will not only be able to reward their most loyal customers, but also learn more information about them such as their frequency and what they buy.
*Note that data capture of this nature is only available with certain loyalty programs.
What are some things that you have done to increase the profitability of your restaurant? We would love to hear them!
Related Reading
- The Octalysis Framework for Gamification & Behavioral Design
- What is Gamification? Definition, Examples & Framework
- Top 10 Marketing Gamification Cases
- Top 10 eCommerce Gamification Examples
- 90+ Gamification Examples & Cases with ROI Stats
- Actionable Gamification: Beyond Points, Badges & Leaderboards