Restaurants aren’t known for having especially high profit margins. In fact, the average profit margin in the industry fall between 2 and 6 percent. But that doesn’t mean that you can’t earn a solid living by opening a restaurant — you just need to choose one of the more profitable types of restaurants.
There’s a lot that goes into determining restaurant profitability. Every restaurant will have different expenses based on their particular location, style and menu choices. But there are a few general concepts that tend to be more profitable than others. Here are ten of the most profitable types of restaurants for you to consider.
Most Profitable Types of Restaurants
Alcohol has one of the highest markups of any restaurant item. So bar and grille, pub or restaurant that focuses mainly on alcohol sales could do fairly well, profit wise. Though exact costs and earnings vary by location and style of business, it’s estimated that bars can earn about $300,000 a year. Of course, you need to factor in startup costs and ongoing expenses. But many bar owners are able to recoup those costs and become profitable in just a few years.
Breakfast foods have some of the most affordable ingredients around. And traffic at breakfast restaurants has increased over the past several years. This means that opening a restaurant that focuses primarily on breakfast food can be very profitable. Of course, you’ll bring in less money overall if you’re only open during breakfast hours. But some diners stay open for extended hours and continue to offer staples like eggs and pancakes all day.
In a recent survey, more than half of independent food truck owners said they bring in more than $150,000 a year. It may not be the highest number. But food trucks tend to have low costs since there’s no rent and usually limited staff and menu costs. If you’re able to effectively manage food costs and sell at high traffic events, you can earn a significant profit.
Virtual restaurants, or those that only offer delivery rather than dine-in or carry-out options, have increased in popularity in recent years, mainly in large cities. Still a relatively new concept, there’s not a ton of data available about earnings. But you can save significant money by skipping the storefront. You don’t need to spend extra rent on a location in a heavy traffic area. You’ll likely need less space, and you don’t need all the extra furniture and equipment that go into creating a customer-friendly space.
Farm-to-table restaurants are those that only use fresh ingredients directly from local farms. It’s become a popular concept in cities around the country, due mainly to the sustainability and flavor benefits of using locally sourced food. However, these ingredients can be more expensive. So the business model is most viable in large cities and upscale markets where people are willing to pay extra for those benefits.
About 37 percent of the population eats vegetarian meals at least some of the time when eating out. Plant based meals provide numerous health and environmental benefits, which can be very appealing to a wide array of consumers. In addition, skipping the meat can save restaurants money on food costs, depending on the specific ingredients you choose.
Independent pizza restaurants earn nearly $450,000 in sales each year. Depending on the size and location of your restaurant, there can also be significant costs involved, including rent and equipment. However, many of the basic ingredients used in making pizza are fairly affordable.
Italian restaurants or any eateries that serve a lot of pasta tend to make a fair amount of profit due to food markups. Restaurants only pay a nominal amount for the pasta in each dish. And in high end eateries, pasta dishes can go for between $25 and $30 depending on the other ingredients included.
Quick Service Restaurants
Quick service restaurants brought in a total of $256 billion in 2018. So cost conscious consumers are continuing to flock to these convenient counter service locations for meals. With this type of restaurant, you probably won’t make a ton of profit off of each sale. But instead, you’d rely on a high volume of orders. So you do need to choose a location with a lot of foot traffic to keep people moving in and out at a good pace.
It might not seem like an especially profitable idea to let customers take all the food they can eat. But buffets keep costs low by minimizing labor with few servers, choosing inexpensive bulk ingredients and charging extra for drinks.