How to Calculate ROI in Restaurant Marketing

As of the end of 2023, there were more than 749,000 restaurants operating in the United States, with around 13.2 million restaurant employees.

What are you doing to stand out in a crowd of nearly three-quarters of a million?

How you answer this question inevitably comes back to one thing: your approach to restaurant marketing. Have you got a solid marketing plan? Do you know if you’re getting ROI on your strategies? These questions are vital to ensure you stand out from the crowd.

Take KFC, for example. In recent years, KFC’s marketing department has started chicken tender wars, introduced us to a chicken cult, and even sent a chicken sandwich into space. 

Of course, a global chain with more than 30,000 locations has a marketing budget that would dwarf most quick and full-service restaurants (space travel ain’t cheap, folks), but the good news is when it comes to marketing costs, the size of your budget doesn’t matter nearly as much as the performance of your individual restaurant marketing campaigns. 

Being creative for creative’s sake doesn’t cut it; you have to prove that your investment of time, money, and energy actually did something positive for the business. To do this, you need to calculate marketing campaign performance metrics, such as return on investment (ROI).  

In this guide on how restaurants can calculate ROI in their marketing campaigns, we'll cover:

• How to Create a Restaurant Marketing Strategy 

• How to Gauge the Performance of Your Restaurant's Marketing Initiatives

• How to Calculate the ROI of Your Restaurant's Marketing Initiatives

• Additional Tips for Mastering the Art of Restaurant Marketing

How to Create a Restaurant Marketing Strategy

Too often, we see businesses adopting the age-old “throw it all out there and see what sticks” marketing philosophy. This undermines two critical elements of a successful strategy: intention and direction. 

Sure, you might enjoy some wins, but without that all-important restaurant marketing plan outlining what you're doing and when, you’ll have a tough time pinpointing where those wins came from. To properly measure marketing ROI, you must track your campaigns.

Your restaurant marketing strategy is the combination of all the marketing efforts you have planned for the year ahead, including digital marketing campaigns and any marketing spend on other strategies. You can create a restaurant marketing plan by following our handy guide. 

Each of the marketing campaigns on your calendar should have the following information outlined:

• Customer Intel: Who are you targeting with this campaign? What do you know about their behavior and preferences? Choosing the right customers to target is vital to ensuring the success of your marketing efforts.

• Intended Marketing Channel: Where will this campaign take place? Will you include digital marketing channels like email or social media?

• Key Marketing Messages: Why does this campaign matter to the customers you're targeting? What are you trying to get them to do? 

• Campaign Goal: Why are you conducting this campaign? To increase your followers on social media? To sell more of a specific menu item? Or to simply drive organic sales growth? Whatever your end goal is, make sure it's outlined early on. 

• Campaign Duration: How long will you be conducting this marketing campaign? Will it run over months, or will it be an intense week-long marketing investment?

• Marketing Campaign Performance Metrics: Let’s say you’ve just completed a four-week restaurant marketing campaign to drive sign-ups to your restaurant’s loyalty program (since you know that it can cost up to five times less to retain an existing customer than to acquire a new one). Success, in this case, is a program sign-up, but you’ll also want to track when and whether these new loyalty program participants become paying customers, as well as the menu items they're partial to.

And let’s not forget the elephant in the room: budget.

How Much Should You Spend on Restaurant Marketing?

There's no magic number when it comes to budgeting for restaurant marketing — it's wholly dependent on factors unique to you and your restaurant. You may even find that your approach to budgeting for one restaurant marketing campaign doesn't work for future campaigns you're piloting.

You’ll find plenty of opinions online about how much of your total gross revenue should be earmarked for marketing. It seems like for every person you ask, you get a different answer. WordStream, for example, recommends that new businesses plan for 12-20% and established businesses plan for 6-12%, while Restroworks suggests between 3-10% of your total sales.

Confusing, right?

To pinpoint the correct marketing budget for your restaurant, look at your total revenue, audit your past marketing spends, write a comprehensive list of what you’ll need to buy or do, and then arrive at an amount that feels comfortable (or even a bit uncomfortable) to you.

With a marketing cost expectation and a solid plan now in place, your next task is to monitor your campaign performance metrics. In the next section, we'll focus on how to calculate marketing campaign ROI. 

How to Calculate Marketing ROI for a Restaurant

Here's a hypothetical: After reviewing the sales reporting and analytics from your restaurant point-of-sale (POS) and employee scheduling software reports, you’ve noticed that sales are suffering on Wednesday evenings, and your restaurant is overstaffed as a result. 

You decide to run a social media marketing campaign promoting a Wednesday wing special for the month of January to get more bodies through the door. 

Come February, it's time to analyze the campaign's performance to see if you’ve got a good marketing ROI. Here’s what you’ll need to do:

1. Calculate the total sales of any checks that included your Wednesday wing special.

2. Subtract your cost of goods sold, or COGS, to reveal your gross profit.

3. Deduct your marketing expenses to reveal your net profit.

Use one of the following two marketing ROI formulas to calculate ROI for your restaurant marketing campaigns:

ROI = (Net return on investment) / (Cost of investment) x 100%

or

ROI = (Final value of investment - Initial value of investment) / (Cost of investment) x 100

To calculate your marketing ROI percentage, divide your gross profit by your marketing expenses. If, for example, this value works out to 200%, it means that every $1 spent on your Wednesday wing campaign generated $2 in profit. Not bad!

Is there a “sweet spot” when it comes to marketing ROI? Not necessarily, but the goal is to be in the green – meaning your return was greater than your investment –  not the red – where your investment was larger than your net gains. 

Tips to Maximize the ROI on Your Restaurant Marketing Strategy

If you’ve run the numbers through a marketing ROI formula and found you're in the red, don't worry! It happens to all of us. Here are three things you should consider doing (or avoiding) to achieve a healthy return the next time.

1. Keep a Watchful Eye

Regularly measuring marketing ROI is essential for determining when (and where) to change things up. Ultimately, your goal is to maximize ROI by getting the best bang for your buck. You might find the constant stream of restaurant data analytics overwhelming, but over time, making data-driven decisions—whether directly related to marketing or not—will start to feel second nature.

2. Beware of Vanity Metrics

Tableau accurately defines vanity metrics as “metrics that make you look good to others but do not help you understand your own performance in a way that informs future strategies.” 

Be careful not to hang your hat on that Instagram post that got 1,000 likes; if customers aren’t coming to try your new superfood smoothie, the likes mean very little. Metrics should always be actionable, accessible, and auditable.

3. Engage with Your Audience

Not sure why your website traffic flatlined? Your analytics can point you in the right direction, but the most reliable source is your customers themselves. Market research involves more than just the audiences you’re targeting — it also considers the ways you’re targeting them. 

Consider sending out a survey or encouraging online reviews. That way, you can be sure you’re giving the customer lifetime value in terms of the experiences and tastes you offer.

Use Toast to Improve Your Restaurant Marketing ROI

Looking for more help with improving your marketing cost-to-benefit ratio? Toast provides a variety of restaurant technology and tools to help you boost your establishment’s reputation and give your marketing campaigns the best chance of success.

For instance, check out our email marketing tool to rake in easy, untargeted revenue. Alternatively, use our restaurant loyalty software to set up your own loyalty program and keep your customers coming back.

You can also download Toast's customizable restaurant marketing plan, which includes some additional restaurant marketing resources bundled in to help with marketing ROI calculation.