October 27, 2022
Are you starting a restaurant or trying to grow your restaurant and you’re looking for ways to ensure that people show up to dine at your restaurant? I’m assuming you fit that description or else you likely wouldn’t be here!
I’m going to make another assumption that you are most likely planning to open or already own a single-location restaurant. Maybe you plan to expand your empire eventually or franchise and that’s great, but for the sake of this article, we’re going to be focused more on growing a single location within your community. Now, let’s get into what we’ll actually be covering in this article so you can determine if you’re interested enough to continue reading.
How many customers does your restaurant need to be profitable?
- Restaurant Startup Costs
- Monthly Overhead & Operating Expenses
- KJ’s Place Example Case Study
How much does it cost to acquire customers?
- How to Calculate Customer Acquisition Cost
- Restaurant Industry Advertising Averages
How to get more customers at your restaurant
- Common Restaurant Marketing Methods
- New Restaurant Marketing Ideas
- Ideas to Increase Restaurant Revenue
How Many Customers Does your Restaurant Need to be Profitable
There’s no question that for your restaurant to be profitable and successful, you need paying customers! However, it’s important to know just how many paying customers we need to show up. This sounds obvious but it is a very important detail and one we can calculate with the right numbers, research, and tools. This gives restaurant owners a basis to shoot for and to measure their progress to see if things are working. So, before we can say how many customers you will need to be profitable, it’s important you understand what you will or what you are paying every month to keep your business going.
How Startup Costs Impact How Many Customers you Need
It’s important to point out that if you are starting a restaurant it is important to understand how your startup costs will actually impact your profitability and thus how many customers you need to come to your restaurant. And if you’re an existing restaurant, this may hit home depending on how it was handled. Two things are important here.
- How much did it actually cost for your restaurant to open
- How did you fund the opening of your restaurant
To elaborate on the first point, how much it costs you to open your restaurant will actually have a significant impact on how much money you need to generate (and how quickly you need to generate it) in order to be profitable. According to Restaurant Engine, the median restaurant costs $275,000 to open, and if you plan to own the building that number increases to $425,00 for the median not average. Of course, this depends on many factors like where your restaurant is located but this same article lists 5 areas that startup restaurants typically overspend that are worth taking a look at. Spoiler: one of them is marketing and we’ve got more on that later!
And for the second point, depending on how you funded your startup like if you bootstrapped and used your own savings, received a loan, or potentially have an investor(s), that will impact how great of a return is necessary in order to satisfy the parties involved.
If your restaurant is self-funded you may be less concerned about your long-term return and more concerned with just getting to break even so you can pay yourself and keep the business going. If you took on any debt from a bank, SBA lender, or maybe even a friend or family member that changes our target number of customers because our monthly cash outflows are going to be higher since we have a debt to repay and the terms of that debt can change it even more. And lastly, if you took on any investment to open your restaurant, you certainly have an expectation to reach a certain point of profitability in order to generate an expected return for your investors.
Don’t worry, all are viable and common ways to fund a restaurant and there are many more not listed here as well. Here’s a more complete list of the funding options for your startup restaurant. It just changes your customer acquisition goals and I’ll show you how that impacts our target customer base numbers as we go! Next, let’s look at how overhead expenses will impact how many customers you need.
Restaurant Overhead Expenses
Your overhead expenses will impact how many customers we need at our restaurant to be profitable, it’s very important to understand how much we are paying in monthly overhead and expenses. Typically, restaurant costs can be put into 3 groups:
1) startup costs
2) food costs and
3) overhead costs.
We’ve already talked about #1 and how that can impact how many customers you need, and we’re going to assume you’ve got #2 under control as you understand your menu and what the best rates are to manage that efficiently because the point of this article isn’t about managing your food costs but rather getting people in the door. So, we’re going to be focused a little more on #3 which are the expenses you need to maintain every month to keep the lights on.
Now, I’m not going to outline every single typical expense and line item that contributes to your restaurant’s monthly cash outflows, but I am going to show some example numbers in a case study in order to give us a basis when we get to calculating how many customers we need at our restaurant. Obviously, your food and labor costs are likely the “easiest” thing you can change on any given month and would greatly impact how many customers you need, but I’m not a restaurateur and we want to stay a little higher level than that.
If you are in the process of planning your new restaurant now and are looking for some resources to understand what are typical numbers for restaurant assumptions like “how many seats are in a typical restaurant?”, “How many times can you turn a table per meal time”, “how many tables can a server typically handle?” check out our article about 15 common assumptions for restaurant projections and just do some basic googling to find resources.
The biggest overhead expenses of a restaurant are typically rent, taxes, utilities, supplies, and advertising/marketing. It’s important to mention that a few of these big important expenses are a little out of your control especially if you are already in operation once they’ve been set in motion because they are contractual like rent or a non-negotiable rate like utilities or taxes, but there are a couple we can play with.
Let’s pause for just a moment. The point of mentioning all of these different expenses and costs is not to highlight the fact that you’ve done or might do something irreversible, but rather to understand that most restaurants likely aren’t going to be successful by just existing and each restaurant’s cost breakdown is going to be different. Even really lean restaurant models with dirt-cheap rent, cheap food costs, and cheap labor, still have a threshold they need to meet each month of customers coming through the door. The objective of this article is to focus on A) how many customers we need and B) ideas to get those customers. So, stick with me. But if you haven’t opened yet, plan very carefully because some things you won’t get to change after that ball is rolling so spend time researching a fair lease rate, consider renting equipment or buying used, buying used or DIY decor, and things like that.
KJ’s Place: A (Fictitious) Case Study on How Many Customers We Actually Need to Attract
Up to this point I’ve done a lot of blabbing about things you have maybe already heard about without offering any real examples or ideas on how to actually get more customers to your restaurant. Or maybe you skipped everything up until this point to get into the meat of things… welcome, if that’s you! What I’m going to do now is demonstrate a fake restaurant’s (modeled after many real ones I’ve encountered) financial situation using one of our very handy dandy restaurant financial projection templates and we’re going to assess what KJ’s Place situation is and how many customers it would take to push them into profitability.
Okay, I’m about to show you A LOT of numbers through a series of screenshots to set the scene so please don’t get overwhelmed and bail out!
First, these are some of our starting assumptions for KJ’s place. We opened up on January 1 of 2022 with a personal investment of $50K and an SBA loan for $240,000. We are leasing our space and we used $125,000 to build out the entire restaurant. We spent $70K on equipment, another $50K on furniture and decoration, and then lastly $10K to make the place noticeable from the outside with some nice signage. Add in another $40K or so in working capital so we have our runway to try and get profitable as soon as possible.
Next, you can see our revenue assumptions broken down. KJ’s place has 100 seats, we’re open 6 days a week, and we offer lunch & dinner meal times as well as takeout. We just opened up so we’re still at a pretty low percentage of capacity filled on average each month but growing at roughly 5% each year with just a few takeout orders each day. You can also see we include our food costs here as each menu item sold has an associated cost with it.
Next, you can see our breakdown of direct labor costs and our staff of hourly employees needed to fully staff our restaurant each month. You can also see our monthly operating expenses and overhead costs which we discussed earlier to give you an idea of typical expense items for a restaurant! When we originally created the projections for this restaurant, we did some simple research and googling to understand what are typical benchmark numbers for restaurants to shoot for as well as numbers that were common for our specific geographic location for items like rent or how many servers per tables we needed. You’d be amazed how easy it is to find out things like how many people you need on staff and really any expense or cost of goods sold number with a simple google search.
And finally, you can see how KJ’s Place is working out financially by checking out this profit and loss summary table. It’s looking a little rough right now. We opened at the beginning of 2022 and are set to have a pretty significant loss which isn’t uncommon for restaurants in their first year, but the more concerning thing is that at our current growth rate trajectory, we won’t break even (negative net income) until after year 5 and even then we’ll just be scraping by and that could easily be gobbled up by some unforeseen expenses. Plus, we’re not even paying ourselves! So, something has to change in order to turn this ship around!
Imagine with me that KJ’s place has its food and labor costs under control and their monthly overhead is reasonable or at least cannot be changed significantly at this point. That pretty much means we have one solution to get to profitability and that’s to generate more (profitable) revenue. And the only way to do that is by getting more customers! Right now KJ’s is getting a little less than 3,000 customers per month but also currently spending zero dollars on any advertising efforts.
So, for our original question at the beginning of this section: “how many customers do we actually need to be profitable”, the answer is kind of two-fold. Let me explain with some scenarios.
- Scenario 1: Let’s say in month 6 of KJ’s (that’s when we start to run out of our cash reserve), we found a way to double our monthly lunch crowd capacity filled percentage from 10% to 20% indefinitely (and apply our 5% annual growth rate going forward), we jump up to about 3,500+ customers per month (an increase of 500) and we’re now set to break even in year 3 instead of year 5 or after which is actually a common break-even timeline for the restaurant industry.Great!
- Scenario 2: We find a way to increase our more lucrative dinner crowd by 50% so our monthly capacity-filled percentage is now 30% instead of 20%. That increases our total base of customers served per month to a little more than 3,300 moving forward but now we just barely experience a loss in year 2 and are profitable every year after.
- Scenario 3: We decide to find a way to get more people to order takeout and we triple our daily takeout orders from 5 to 15. We add another 300+ customers per month and nearly $5,000 more per month in revenue and that change alone has us breaking even in year 4 with a small loss in year 3.
Now, imagine we implemented all 3 of those scenarios and the success compounds. We’re looking at great profitability within 12 months of implementation.
So, when trying to figure out exactly how many more customers we need to be profitable, we could do the math to get a specific number but instead, I think it depends on how you want to go about earning that new customer and in what way or for meal time/price point. And the second part of the “two-fold” answer I mentioned is that it also depends on how much it costs us to implement these methods of acquiring new customers. In the scenarios I demonstrated above, I did not account for any advertising costs or special promotions which typically wouldn’t be free. Any additional cost moves the goal line back a little bit which means we need even more customers. So, now let's talk a little bit about how we figure out how much it costs us to acquire new customers!
How to Calculate Customer Acquisition Costs for a Restaurant
Customer acquisition cost is if you take the total marketing spend for the month and divide it by the number of new customers for that same month that will tell you your CAC per customer.
Let me explain further as we are about to try some new ways to get some customers in the door at KJ’s, it’s important that whatever we try has a purpose. And if at all possible, a way to measure it. Not all things can be measured as specifically as a digital e-commerce or Saas company, but we can certainly track what we spend, and monitor the revenue impact at the end of the month to see if it made a difference. Or if it’s a daily or weekly promotion you can measure at the end of that week.
So, again, the way we can calculate our restaurant’s customer acquisition cost (CAC) is by taking our total marketing spend for the month and dividing it by the number of new customers we had that month. So, if we spend $2,000 and have 100 more customers than our monthly average, we can assume we have a CAC of $20.00 per customer. New customers could be the difference between the month before or perhaps the average number of customers per month from the last few months. Your point of sale (POS) system should also help determine what percentage of your customers were returning versus brand new as well based on credit card numbers.
Using our fine & casual dining restaurant projection template, I can see looking at our current performance and trajectory (not including any of the 3 scenarios we modeled earlier), our typical revenue per customer is about $22.70 and will naturally grow with our current growth rates we are assuming from raising prices and costs. So comparing that to my example $20 CAC per customer, each customer gained does add to our profitability but not by much. Restaurants and the hospitality industry typically see an average of $44 to $100 CAC so that means after their first visit, we would not be profitable after acquiring that customer.
Something to keep in mind here that is hard to demonstrate, is the lifetime value of each customer gained. In theory, if a customer comes for the first time and enjoys their experience, they will return at some point or possibly some regular frequency. If each additional time they come back doesn’t require any extra marketing spend, we’ve earned a regular and that customer becomes more and more profitable for us. According to Upserve, the average regular customer will dine with us 1.7 times per month and will remain a loyal customer for 2.7 years. We’re not going to model that, but just keep the importance of that in mind. Break-even or a loss on acquiring a customer’s first visit isn’t necessarily bad if they continue to come back and this should likely even be expected.
How Much Does the Restaurant Industry Spend on Marketing?
Two rules of thumb that seem to be widely accepted within the restaurant industry are for your marketing budget to be between 3-6% of monthly sales and for any marketing efforts to follow a 70/10/20 split rule. 70% towards what has worked for you in the past, 10% towards testing something new, and then 20% towards something you tested previously that seemed to maybe work giving you the chance to slowly grow that into your “70”. Many also say that is common for newer restaurants to allocate even more towards marketing even all the way up to 30%.
Using our example case study of KJ’s Place, we haven't been placing any budget towards ongoing marketing and we have very little cash reserve left to maybe start immediately with $2,000 - $4,000 (3-6% of our $65,000ish in monthly sales) per month could be difficult and we don’t have any tried and true method yet. So let’s finally jump into ideas to grow your restaurant and we’ll apply a few of these ideas to our KJ’s example to see how they could help and demonstrate how you can plan & measure for your own restaraunt!
Ideas to Get More Customers at Your Restaurant
It is true that industries constantly change and evolve and in order to stay relevant you must set yourself apart from your competition. While that is accurate for restaurants, there are certainly some tried and true best practices for growing your restaurant that are worth considering or may even be necessary nowadays.
Essential Restaurant Marketing Methods to Grow Your Restaurant
Having an Online Presence
It is absolutely essential to have a significant digital presence for your restaurant. There may be a very select group that can coast on history & exclusivity alone and never really be present online but that is not the case for the vast majority. It’s worth it to do this well and not halfway. This is also not a thing you can set and forget. It requires maintenance and effort but it’s far cheaper than many marketing options for your restaurant.
- Website - full menu, ability to place orders, and make reservations if you offer them. This is likely the largest investment for this category but does not have to be astronomical. There are very easy ways to build a website or pay someone cheap to build a solid website with a few pages. And there are several 3rd party software that can help you manage orders and reservations with simple integrations to your website.
- Google my business profile and Yelp set up and ownership - if a potential customer cannot find you on google maps or on yelp, they may assume you aren’t open. Providing hours, reviews, directions, busyness, and more can really increase the likelihood of someone trying you out.
- Social Media - This does not need to be any more than a post or two a week. Sharing any special events, promotions, local involvement, menu changes, and more. This will feel not worth it in the early stages but with commitment, this can grow to be a hub of your regular customers eager to react to anything you share.
- Email your customers if you have emails. This information will come from your POS if you issue electronic receipts or people can opt into your email list on your website to be notified of new specials and other information.
- Leverage industry and location specific marketing platforms. For example, BrewLogix launched a platform to make brewery marketing easier by connecting brewers directly with their fans and customers.
So how do we quantify this in our example? Let’s focus on the ability of online searchers to find KJ’s Place via google search. According to a user behavior report published by Google and this article by Toast, searchers that search something like “restaurants in Indianapolis” or “restaurants near me” and they are located in Indianapolis, 30% convert to customers IMMEDIATELY, 60% within an HOUR, and 80% eventually. Those are wild numbers. Using Google’s free keyword planning tool, I can tell that every month nearly 50,000 people search for “restaurants in Indianapolis”. So 30,000 people every month are going to convert within an hour after searching that phrase. And you want to make sure that your restaurant is on the list! Especially if someone searches for that within a smaller city or town, your chances only go up.
Let’s assume for KJ’s Place we create a solid online presence, with a website and google business profile we’re found by about 200 more people each month for lunch, dinner, and then about 50 more people a month order takeout. You can see in our updated numbers down below that this is a big leap forward in sales & profit for us! And this is a very low-cost method and not at all unrealistic.
There’s not a ton of detail necessary for this point other than that it is worth the effort to have a nicely designed logo and signage so that people will recognize your brand when they see it. Hve nice menus and interior branding that make sense as well. Having an established brand can open the doors later on for things like merch so make sure you can imagine someone actually wearing your brand on a shirt someday. It’s worth it to have a graphic designer make one!
Turn existing customers into Regular customers
Another big one. The best customer is a returning customer. Regulars are on average 5 times cheaper than acquiring a new customer. New customers are VERY important, but the more loyal your customers are, the higher your profitability soars. It is said that return customers can account for 60% of sales so it is vital to maintain them. If that is true, 2,100 of our now 3,500 monthly customers at KJ’s are returning customers. Imagine having to replace all 2,100 of those people every month. Sounds expensive. If we grew our regular customers by just 3% (about another 100ish customers) at dinner time & lunchtime, we move the needle by another $22K when looking at our net income for 2022 and the years to follow.
Focus on Local
It can be very easy for new restaurants to neglect how involved they are in their local community. Especially if they are not native to the area. Being involved with the local community does not have to mean writing checks for everything either. Sure, sponsoring a little league team or a charity organization is good but what matters, even more, is being visible consistently. Volunteer at local events and on committees, offer your space for events, and connect with local leaders. Many restaurant owners have very little extra time so enlist your family and friends to be ambassadors for the restaurant.
Stay on top of Reviews
Business reviews can be really scary for any business owner. Sometimes it feels like it may be safer to not allow for any reviews rather than risk some negative ones. Really, I get it. But the truth is, people who have a negative experience are FAR more likely to find a way to talk about it than people who had a good experience. So, you want to be the owner and moderator of the space where people talk about your business. Good or bad. Because that means you can monitor them and act quickly when there is a negative experience. The data really goes on forever in regards to how much positive and negative reviews impact a customer's decision to dine with you so the best thing I can recommend is to take it seriously.
- GRIND for positive reviews. Make it hard to hate you. Make it right when there are bad reviews that may be switched to good reviews if you earn it
- Ask for positive reviews when a customer has a good experience and be honest about it. “Did you have a good experience this evening? Great! Would you consider leaving us a review on Google (or the link on the receipt, etc.)? We’re a new restaurant and that really goes a long way for us. *And if you had a bad experience*, “I’m so sorry to hear that, would you like to speak with our manager?”
- Reply to every review so people can see that you care - especially negative reviews. If someone leaves you a negative review, you have to take ownership, apologize, and offer an olive branch as quickly as possible. The same day is best. DO NOT give in to the temptation to fire back sassy replies even though it’s very easy to feel defensive as the owner. It never works.
Put effort towards programming - specials, events, and themes
It’s pretty common for this type of thing to happen at every restaurant and I’d recommend doing all of the things you can but not so much that it is corny or lose track of all of the discounts/specials. Also, I recommend staying creative and keeping things fresh. Just because trivia night worked great the first few times, doesn’t mean it’s going to work every single Thursday for the rest of eternity.
A few things to keep in mind, it might sound counter-intuitive but don’t give into the temptation to do programming just to increase the typical “slow” times. Not that you can’t do that, but there is typically a reason why your restaurant has weekly and seasonal dips. Having a meal special or that kind of thing is great for slow days of the week, but don’t blow your budget fighting the current to get more customers at a time you know it’s going to be tough. Instead, double down on your good days and times of the year. Pack the place and create that sense of FOMO and then pinch your pennies when it slows down. Also remember, any discount or special rate that you offer is in fact an expense to you, this includes lunch specials. That becomes a part of your CAC cost because it is lost revenue and you have to eat that. So make sure that whatever promo or specials you are offering, you actually monitor that they are working and don’t keep them forever because you don’t want to build a regular customer based upon a specific price point for an item.
*A note on advertising. While advertising through google ads, social media ads, TV, radio, billboards, etc. is technically a “common” marketing tactic, it can be very expensive and a waste of money if it does not work. Almost always these will require a 3rd party to be involved unless you have the time and know how to do it yourself and that increases the cost and they may not be as familiar with your restaurant as needed to be effective. Personally, I would try many more things before resorting to any sort of mass advertising effort.
New Restaurant Marketing Ideas
This section could go on forever but what I’d like to encourage you to do is never be afraid to try something new. Maybe other restaurants have tried it or maybe nobody ever has. That’s okay. Remember the 70/10/20 rule. There’s a reason that 10% is in there to give you the freedom to experiment. Here are a few ideas that aren’t brand new by any means but typically don’t make the “tried and true” list. These ideas also aren’t necessarily marketing ideas. Think outside of the box.
Takeout & Delivery Optimization
Did you know that at the beginning of the Covid-19 Pandemic, Chuck E, Cheese (yes, the kids play place) launched the brand, Pasqually’s, selling pizza and other food items exclusively available for order through 3rd party delivery apps like Doordash and GrubHub? They didn’t put up any signage or change anything about the establishments, the Pasqually brand was just visible as a “virtual kitchen”. It actually worked and kept the company alive. I’m not sure if today it’s still working or what happened with all of that, but many different restaurant brands have followed suit doing something similar including Applebees, Chili’s, Boston market, and more, and so could you.
The idea is that it gives you the opportunity to be exposed to prospective customers in new places. Perhaps you don’t want to offer your full menu through delivery and work through the marginal efforts of a 3rd party delivery service or disrupt your normal recurring customer base by making delivery (less top-line lucrative) more prominent. Let’s say you’re an Italian restaurant offering pasta dishes and artisan cheeses and whatnot but you can make a killer pizza and some wings. You can create a new brand that is only visible online for deliveries and maybe takeout that sells just wings and pizza. Your kitchen staff isn’t responsible for a massive new menu, and you don’t need to hire more servers. The main important detail is to make sure you never confuse your existing customers so if your customer never sees your location makes the most sense, then delivery only it is!
For restaurants considering getting on 3rd party delivery services (just in general not for creating a virtual kitchen brand), I can’t say for certain if I’d recommend it. It’s notoriously expensive for small businesses by giving up a significant portion of the margin in order to pay for the fees. If you can offer just high-margin products and get that process down to get orders prepped and out the door, then I say go for it. I added in 250 monthly orders via Doordash at a 20% fee/expense in month 8 for our KJ’s example and you can see that it did help, but again it’s however manageable it is for your current operation, brand, and customer base. You will likely need to charge higher prices through this avenue.
Okay this one is a little easier said than done, but I have seen it really make a difference both in revenue and also new customers for restaurants. Do you have any items on your menu that are 1) easy to make larger quantities of 2) may be made with some form of signature or “secret” recipe and 3) are packageable? This could be a perfect opportunity to sell something “wholesale” or even start distributing. This can be done on a small/local scale but can also grow into a larger operation. For example, St Elmos steakhouse in Indianapolis is a highly regarded restaurant here in my home city. Over recent years they have begun distributing their famous shrimp cocktail sauce as well as a special bourbon used in their signature cocktail. Now, they are a very famous and long-standing restaurant so they were able to launch into grocery stores and liquor stores across the country fairly quickly, but my point is that those things may exist on your menu that you could bottle and sell. Hot sauce, jams, salsa, signature alcohol, and things like that have a long shelf life so your inventory can last for a while. You can do this on your own on a small scale and sell them on a shelf in the restaurant, online, or at a local market almost like merchandise but you can also scale up and partner with a distributor to outsource the whole operation.
Now, when it comes to “wholesale” you may make really good chips, bagels, baked goods, or something of that nature that businesses or other restaurants may wish to purchase regularly or in bulk. I had a client who was a soup & baked goods restaurant. They added a wholesale segment of their business to sell bread, bagels, and croissants in bulk to other restaurants and some large corporate clients on a regular basis. I’m going to model this one but as you can imagine it could grow quickly but does come with an increase in costs as well. If people start seeing and buying that branded product before ever being in your restaurant that means more revenue and a likely new customer at some point if they are local.
Sell a simple product(s) at Local Markets
Continuing off of our previous point if there are any items you can make in bulk or are easily packageable, it is very doable to get involved with your local farmer's markets or local events in your community. This is a great opportunity to make and sell a small item or even something you can prepare in advance rather than fresh each time there is a market, you can make a little money but also build awareness. Sell the items at a lower margin to get them into the restaurant. I’m not advocating for joining the farmers market circuit in every town every single weekend because I’ve seen that get overwhelming and burn restaurant owners out, but anything helps. Also, depending on your city sometimes the booths at these markets are expensive or hard to get. But friends & family may be able to help so you aren’t paying staff to go either!
Have a quirky trait about your restaurant people won’t forget
This is a fun one and something I think can be done for little to no cost. The challenge is if it’s creative enough to stick. And if your employees and customers will buy in. What is it about your restaurant other than your stellar food, that makes it a really unique experience? I have 3 examples that are all different to get your gears turning. Two are local to me and one I only know of because it has gone viral!
- Bub’s Burgers in Carmel, Indiana. A relatively simple bar and grill where they offer a sandwich called the Big Ugly. It’s over a pound of ground chuck with all of the fixins. And if you finish it, you get your picture on the wall of the restaurant. And when I tell you that almost every single square inch of the interior of this restaurant is covered in pictures, I mean it. And the more you eat in one sitting, the bigger your picture is. It’s turned into an event for friends and groups as well as a destination for popular shows like Man vs Food. But all they did is create a food challenge (that is really tasty by the way and will make you feel miserable. Trust me.) and that really put them on the map.
- Bonge’s Tavern in Anderson, Indiana. Bonge’s is a reservation-only restaurant that is booked nearly a month in advance on the weekends. If you knew anything about Anderson, Indiana, you’d know that there’s a specific reason you’d want to make a trip there. Not to be mean (I lived there for 4 years), but there just isn’t a lot to do. Bonge’s is actually way on the outskirts in the middle of nowhere. But what they have done is 1) have incredible food and created the idea of exclusivity but 2) they have turned the “wait” into a full experience. People will tailgate for hours either waiting on their reservation or hoping to get in for an opening. They drink and play games and all kinds of things outside of the restaurant. It has become a destination in a place you wouldn’t typically travel to.
- Lambert’s Cafe in Sikeston, Missouri. You may have heard of this one, but if you go to Lambert’s make sure you have your head on a swivel. Here, patrons can raise their hand at their table and someone behind the counter will chuck a dinner roll across the restaurant at you and you try to catch it! I’m serious. It is wild. Confession, I know literally nothing else about this restaurant. Given it’s in the south, I’m sure they have some really good home-cooking food, but it’s that unique experience alone that led me to hear about it. Imagine the first time someone did this there and how fun that probably was!
And you know what’s even better about these things? None of them are offered at a discount or cost to the restaurant owner (well maybe some higher dinner roll costs). Pure profit from having fun. So what quirk can you establish? Make it unique. Make it a big deal. Make it consistent. Have your employees weigh in on the decision to make it fun.
Partner with local complimentary restaurants, farms, businesses, etc.
In your community, you can probably think of at least 5 maybe a dozen great *local* restaurants within a 20-minute drive of you. Not franchise chains. It is worthwhile to connect with and get to know the other restaurant owners and consumable goods retailers in your area or perhaps just outside of your area if the competition is fierce. Think about your menu and the menus of the other restaurants or retail businesses and where there could be an overlap in ingredients or food where you could partner together and then cross-promote. This allows you to access the customer base of another (hopefully well-established) restaurant to earn more potential customers. Something to be mindful though is how this offer can come across to other owners especially if you have more to gain than they do. Be prepared to give before you may receive. And be sure to share in whatever the outcome is. Share some of the profit or advertise their restaurant or business too.
- Coffee Shops & Breweries partner to make a coffee-infused craft beer
- Restaurant sells pies & desserts from a local bakery
- Honey, jams, hot sauces, and salsas all can be used as ingredients or standalone in another restaurant’s entrees and you could be listed in the menu
Ideas to Increase Restaurant Revenue Without New Customers
Growing your restaurant does not exclusively have to mean getting more and more customers in the door. At some point, you may have a solid flow of customers but you’re leaving money on the table by not getting more out of the customers you already have.
Offer private events & simple (limited) catering
Not a novel or new idea, but perhaps you’ve been intimidated by catering or hosting events. Or maybe your space doesn’t easily accommodate it. It is understandable that those are limitations they may not allow for this. There are a few smaller ways to offer this though.
For hosting private events or parties, there are some things you need to take inventory of. Take a look at the space that you have. Is there any section of the restaurant that never gets filled up or used? Maybe on a weeknight, you have 40 seats that never get filled. Or 20 on a weekend. Isolate a section of the restaurant equivalent to that many seats (if possible I know tabletop size and configuration matter here) and then reserve it for private parties. Then market that within the restaurant, on the website, social media, etc. Starting this way likely won’t require any more staffing or overtime hours. Now, if you choose to offer the ability to rent out the whole place or something like that, that’s another beast.
For catering, this can certainly get out of hand and hurt you if not handled properly. I know how hard it can be to say “no” if someone comes to you ready to pay $5,000 to have you cater an entire wedding. But do you have the equipment, willing staff, ability to transport, etc. to really pull that off? Because if you don’t, word will travel fast that it was a blunder. But perhaps you can start small. Offer takeout-only catering for select menu items for parties up to 20 or 40 people let’s say. And limit how many of these orders can be placed on any given day. Again, this doesn’t require more staff, just some more coordination on timing.
The great thing about both of these, you can charge a higher rate. You may have a booking fee for the private room or section. And minimums for the catering orders to ensure you always keep a certain margin. They can be very profitable if done well without overwhelming your staff.
Create a loyalty program
Remember when I said earlier that the best new customer is a returning customer? Well creating a loyalty program is a way to earn and reward returning customers. This can be as easy as something like a punch card or an offer that is earned after a certain amount of visits or money spent. Although, 75% of people said they’d prefer a rewards program they can track on a phone versus a physical card. You can also do this through certain POS systems and software to make it more complex offering things like points and a system to redeem those points. My advice? Keep it simple but make the rewards something worth earning. Remember your total CAC cost, if you get that customer back a second and third time, you are earning much more than you’re spending on that customer so you can afford a nice discount or freebies once they have dined with you 5, 10, 15 times. And make sure your staff is aware and bought into the program!
I debated on whether or not I should include merchandise. There are certainly pros and cons to offering merchandise at your restaurant. On the upside, it’s a way for people to literally pay you and also advertise for you. It also cements loyalty from returning customers. They are committing to being an ambassador and when they see that shirt they’ll think “we should go to KJ’s Place this weekend”. If your merch is done really well, it can be a nice little bump in sales too.
Now for the downsides. Merch can be a big expense if you don’t have the cash reserves for it (but we’ve got that 10%!). It’s only going to be as good as the demand for it. You also need a place to display it nicely. And if it’s not done well, it’s obvious.
My recommendations for merch…
- Don’t get merchandise right when you open. There are plenty of other things that need your money and it could be a flop before people even know about you.
- If you’re going to design merch, make it REALLY nice. I’m talking like a shirt anybody would wear with a really nice design. Nobody is going to wear the neon pink with a massive cheesy slogan on it and nobody is going to come to dine with you even if they see that shirt. Make it classy. Make it clean. Make it worth $25+. Offer quality items and not cheesy knick-knacks.
- Start with small runs of limited and exclusive merch. Find out what people like and let yourself sell out. That creates more demand.
- Do some giveaways or promotions that include your merch with your loyalty program or business card lunchtime giveaway or that kind of thing.
And with that, we’ve reached the end. Quite a journey if you read from the beginning. I hope this article taught you something in regard to understanding how many customers you need to gain, how much it will cost, and some ideas to get more people in the door. If you’d like a handy tool to create full restaurant projections for a startup or to see how your ideas may impact your forecasts, pick up one of our restaurant financial projections today.