Restaurant profitability calculations simplified

Introduction:

The restaurant business can be both tricky and deceiving. With a constant cash flow—whether from dine-in customers paying instantly or aggregator payments arriving every two weeks—it’s easy to overlook whether the business is truly profitable. Many restaurants continue operating comfortably for extended periods, even without making a profit, simply because cash keeps coming in. However, sustainability depends on profitability, not just revenue.

To better understand restaurant profitability, let's examine some key financial numbers. Please note that the figures used are for illustration purposes only and may not reflect your actual business data. For accurate insights, always rely on financial statements and real business data. These insights will guide you in identifying areas for improvement and ensuring sustainable profitability.

Let me know if you’d like further tweaks!

Key Assumptions in These Calculations:

• VAT: 5%

• Aggregator Commissions: Averaged at 30%

• Food Cost: 20% (often higher, further reducing profits)

• Packaging Cost: 5%

• Discounts: 23% on average (if you apply 30% discount capped at AED 30)

• Rent (500 sq. ft. space): AED 75,000/year

• Utilities & Marketing: AED 5,000/month each

• Staff: 10 employees for higher sales, reducing to 5 for AED 150K sales. (Avg. salary: AED 2,800)

I haven't included other expenses such as staff visa, insurance, licensing, maintenance, company insurance and interest rates which would further impact profitability.  

For a detailed financial analysis tailored to your business, feel free to email us.

Conclusion:

A restaurant can only be truly successful if it maintains the right balance between online orders and dine-in customers. Dine-in customers are the key to higher profit margins, and every restaurant's primary focus should be on attracting and retaining them. Building strong relationships with dine-in guests leads to customer loyalty and repeat business.

To achieve this, the dine-in experience must be memorable—not just in terms of food but also ambiance and service. Cleanliness plays a crucial role here, and it should be genuine, not just for appearances. Customers spend time inside the restaurant, so real cleanliness, not just surface-level presentation, is what truly matters.

While online aggregators are essential in today’s market, many restaurants sacrifice a large portion of their profit margins just to stay competitive in delivery. If a business is willing to accept lower margins for online orders, why not also invest in providing an exceptional dine-in experience? The return on that investment is long-term customer loyalty and increased profitability.

It's natural to fear missing out on online orders, but shifting focus towards dine-in customers can be a game-changer. With consistent effort, social media marketing can effectively promote the dine-in experience—highlighting ambiance, customer engagement, and special moments. Though this approach takes time and effort, it can ultimately yield stronger brand loyalty and business sustainability.

If you need expert analysis and valuable insights into your restaurant’s performance, feel free to reach out to us via email. We’d be happy to help you understand your business better and explore possible strategies for improvement.

Disclaimer:

These calculations are scenario-based and provided for general reference only. Actual financial performance may vary from restaurant to restaurant. We are not responsible for any inaccuracies or decisions made based on the data provided here. 

For quotes or any sort queries, please contact us at the below address: 

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