Restaurant revenue and profit are some words that you would come across every day. If you’re not aware of these terms then you should know about them ASAP as you might be losing more profits than you think. You might see a lot of customers in your restaurant every day, but does that mean you are making a good profit? Not necessarily. Many restaurants bring in a lot of money but still struggle to stay open. The reason is simple: revenue and profit are not the same.
Many new restaurant owners get confused between revenue and profit. If you do not understand the difference, it can be hard to improve your restaurant’s financial health. Let’s take a closer look at what they mean, how they are connected, and which one is more important.
What Is Restaurant Revenue?
Restaurant revenue is the total amount of money you make from selling food, drinks, and other services. It includes everything your restaurant earns before taking out any expenses. For example, if your restaurant makes RM100,000 in a month from food sales, delivery orders, and catering, that RM100,000 is your revenue.
Revenue can come from different sources, including:
Dine-in and takeaway orders, online food delivery, catering services, selling merchandise like sauces, cookbooks, branded products and hosting private events
A restaurant with high revenue might look successful from the outside, but revenue alone does not tell the full story. You need to check how much of that money is left after paying all the expenses. This is where profit comes in.
What Is Restaurant Profit?
Restaurant profit is the money left after you subtract all the costs of running the restaurant from your total revenue. This includes the cost of ingredients, staff salaries, rent, electricity, marketing, and other expenses. If your revenue is RM100,000 but your expenses add up to RM90,000, then your profit is RM10,000.
Profit is a better way to measure how well your restaurant is doing. A high revenue with high expenses can still leave you with very little profit. On the other hand, a restaurant with moderate revenue but low expenses can be more successful because it keeps more money.
There are two types of profit you should know:
- Gross Profit – This is the money left after subtracting only the cost of food and drinks (ingredients) from your revenue. It shows how much money you are making from your menu items before other expenses like rent and salaries.
- Net Profit – This is the final profit left after subtracting all expenses, including rent, wages, marketing, and utility bills. This is the most important number because it tells you how much money you keep.
Restaurant Revenue Vs Profit: What is the Relationship Between the two?
Revenue and profit are connected, but they are not the same. Just because your revenue is high does not mean you have a high profit. You can be making a lot of sales, but if your expenses are also high, your profit will be small.
For example, let’s say you run a restaurant and earn RM200,000 in a month. However, your expenses (food cost, rent, salaries, utilities, and other bills) add up to RM195,000. This means you are only left with RM5,000 in profit. Even though RM200,000 sounds like a big amount, your actual earnings are low.
On the other hand, another restaurant might earn only RM120,000 in a month but keep its expenses low at RM100,000. This restaurant makes an RM20,000 profit, which is much better.
This is why managing expenses is just as important as increasing revenue.
Average Profit for a Restaurant
The average profit margin for a restaurant depends on the type of restaurant. In general:
Full-service restaurants (with waiters and a full menu) have a profit margin of 3% to 5%.
Quick-service restaurants (fast food and self-service) usually have a profit margin of 6% to 9%.
This means that for every RM100 a restaurant makes, it only keeps RM3 to RM9 as profit after covering all expenses.
What Is a Good Profit Percentage for a Restaurant?
A good profit percentage depends on the type of restaurant, but most restaurants aim for a net profit margin of at least 5%. If you can reach 10% or more, your restaurant is doing very well.
Is It Better to Increase Revenue or Profit?
If you had to choose, focusing on profit is better. High revenue does not always mean success if expenses are also high. A restaurant making RM500,000 a month but with RM495,000 in expenses is in a worse position than a restaurant making RM200,000 with only RM150,000 in expenses.
The best approach is to work on increasing revenue while keeping expenses under control. If both increase at the same rate, your profit stays the same.
What Is a Good Revenue to Profit Ratio?
A healthy restaurant should aim for a revenue-to-profit ratio of at least 10%, meaning for every RM100 in revenue, at least RM10 should be profit. If your profit margin is lower, you need to look at ways to cut costs or increase income.
Which Is Better: Revenue or Profit?
Revenue is important, but profit is what matters most. You can have millions in revenue, but if your expenses eat up everything, your business will struggle. Instead of only focusing on bringing in more money, also find ways to save money and operate more efficiently.
How EasyEat Can Help Increase Your Restaurant Revenue and Profit
EasyEat in simple words is a restaurant technology system that can help you increase your restaurant’s revenue and eventually your profits. You can digitize most of your restaurant’s tasks to improve your efficiency. Your customers will be able to place orders through the QR code and you don’t have to employ extra waiters for this purpose. This is how you can increase your revenue and profits. Your customers will be impressed with the smooth experience that they get with EasyEat and will choose your restaurant over and over again.
Once they become your loyal customers you can send them loyalty coupons and vouchers to please them. You can then ensure a steady flow of revenue from these customers. This is just one of the ways EasyEat can help you in improving your restaurant’s revenue and profits. If you’re interested to know more click here.
