Opening a restaurant business can be daunting, with some studies estimating up to 90% of new restaurants fail within their first year. Coupled with razor-thin profit margins and ever-increasing food costs, the choice to open a restaurant business should be carefully considered.
The most profitable restaurants are those who have found a way to expand their profit margin and stand out among their competitors.
Whether your restaurant business is located in New York or Las Vegas and whether you operate a food truck or a fine-dining eatery, restaurant owners must always stay creative and adaptive in order to succeed in the industry.
A list of the top 50 eateries provides some interesting conclusions including-
- 16 out of the top 50 restaurants are steakhouses, demonstrating a preference for meat dishes.
- New York and Las Vegas are the two most common profitable restaurant locations with New York containing 20 out of the 50 restaurants on the list.
- Only 6 of 50 restaurants are linked to famous culinary personalities.
- Even restaurants who receive a coveted position on the top 50 list have closed their doors since in the time since the list was published.
- The restaurants listed have a very diverse average check price.
With profit margins falling between an estimated 2-6%, the restaurant business is not always a profitable venture. The most profitable restaurant business types include-
1. Bars- Alcohol is a great way to increase your profit margin as it can be marked up significantly. Bars can earn an estimated $300,000 a year. This allows business owners to become profitable sooner than they otherwise may have without serving alcohol at their establishment.
2. Diners- Diner establishments are a staple of the restaurant business. The low food costs of breakfast menu items can increase profit margins for your eatery.
However, a diner that is only open during breakfast hours may not be as profitable as a restaurant that is open for longer hours. To combat this, consider offering breakfast menu items throughout the day and extending your business hours.
3. Food trucks- Food trucks are becoming increasingly more popular in the restaurant industry. Food trucks offer the ability to start a restaurant business with less initial investment than a storefront location.
Food trucks may more quickly grow their profit margins as they do not incur the cost of rent and traditionally have lower labor and food costs than other restaurant business types. More than 50% of food truck owners report earning over $150,000 per year.
4. Vegetarian restaurants- 37% of diners report eating vegetarian meals at least sometimes when eating out. Food costs can also be lowered while profit margins are increased when restaurants purchase fewer expensive meat products.
Vegetarian restaurants also provide the added benefit of being more environmentally and health conscious. A vegetarian restaurant can be particularly appealing to restaurant owners who are invested in the health of their customers and the planet.
5. Pizzerias- Earning an average of nearly $450,000 yearly, pizzerias are profitable restaurant types. Food costs are generally low for pizza ingredients and menu items are often simpler.
6. Delivery only restaurants- A newer restaurant type is delivery only restaurants. These restaurants save a lot of money on rent and other costs associated with providing a great customer experience instore.
Delivery only restaurants are so new that there is not a lot of data available about how profitable they are. For those with less capital like owners of food trucks a delivery only restaurant can be a great option.
7. Farm to table- Depending on your local community demographics, a farm to table restaurant may be a worthwhile investment. With a farm to table restaurant, it is especially important to understand the food budgets and spending habits of your customer base.
Farm to table restaurants can have much higher food costs as they are focused on serving local and sustainably sourced ingredients. Providing a unique customer experience can also be pricey beyond traditional rent costs of a restaurant business.
8. Quick service restaurants- Earning an estimated $256 billion in 2018, quick service restaurants are a profitable restaurant type to consider. As food costs for customers are generally low, a quick service restaurant is more dependent on obtaining a higher volume of orders.
Make sure to choose a location that is visible and easily accessible for customers in order to increase your order volume. Somewhere that has a lot of foot traffic can help increase customer volume as well as turnover.
9. Pasta restaurants- Pasta restaurants are a great way to increase profit margins for your restaurant business. As pasta is such a low food cost item, restaurant owners may earn a lot of money.
Higher end pasta restaurants charge as much as $30 per plate for a specialty pasta dish. Pasta restaurants not only offer a lot of room for creativity but they also have the potential to be very successful.
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