How to Update Your Restaurant Business Model and Generate More Revenue

Remember when you first opened your restaurant? You had a solid business model that accommodated the tastes and preferences of your initial target market and a service style that embraced dining trends. There was also a firm grasp on technology, with devices taking the lead in optimizing restaurant operations. It was perfect! Yes, it was.

Fast forward to today, the restaurant industry has evolved significantly. Both fine-dining restaurants and fast-food restaurants have had to adapt to new trends and customer expectations. 

Watching these changes unfold, you may have felt the impact of falling behind with poor revenue and inefficient operations. Now is the time to reassess and update your restaurant's business model to stay competitive in this exciting (and challenging) market.

Changes in the Restaurant Industry

As we move into 2025, changes in the food industry are affecting food trucks, full-service restaurants, and everything in between. Existing restaurants that successfully adapt to the evolving landscape can do more than just meet current challenges—they can leverage these changes to their advantage.

Increasing Operational and Food Costs

Startup costs continue to increase, but it doesn't stop there. Rising costs impact all types of restaurant businesses, making it harder to maintain a profitable business. Restaurants are spending more on ingredients and wages, with 99% of full-service restaurants spending more on labor in 2024.

Piece by piece, these increases all eat into overall profit and force different restaurant business models to look into multiple revenue streams like loyalty programs and pop-up restaurants.

Changes in Consumer Behavior

A large part of what makes a successful restaurant business model is how you target customers. Understanding consumer behavior and its ever-changing nature influences things like menu items and service style.

There is a continuous trend favoring healthier food options. This includes low-calorie options and plant-based meals. Even casual dining spots like Burger King include healthy choices to attract customers. Business decisions such as this are one of the reasons why fast-casual restaurants are projected to grow by $65.2 billion between 2024 and 2028

Growth of Virtual Restaurants and Kitchens

Virtual restaurants and kitchens, also known as ghost kitchens, are the dark horses of the food industry. Despite facing challenges, virtual restaurant revenue is projected to reach $42 billion in 2025. These business models cater exclusively to online and delivery orders. Unlike a traditional restaurant, this business plan doesn't have full table service or counter service.

Numerous reasons explain why this is so popular. First, bypassing overhead costs and focusing on delivery is cost-effective, especially as online ordering stats show increasing demand. 

Further Technology and AI Integration

If your own restaurant business hasn't updated its technology in the past year, it's likely outdated. The food service industry changes quickly, so even a year can make a big difference in the effectiveness of your technology.

In 2025, automation and personalization will help deliver exceptional service while optimizing operational costs. Online ordering systems, POS (Point of Sale) systems, and Kitchen Display Systems (KDS) are among the most important tools a restaurant business can use.

Like many other industries, artificial intelligence (AI) is set to play a big role in helping restaurant owners create a pricing strategy or restaurant marketing strategy. AI will also be used in customer service roles, answering queries, taking orders, and advertising special food sales via automated email marketing.

Future-Proofing Your Restaurant Model

So, now that you have insight into what 2025 will bring for fine dining establishments and quick service restaurants, how does this translate to creating a restaurant business model?

To gain an advantage over competitors and start 2025 off on the right foot, your business model needs attention. Even if you think it's evergreen and ready for anything, chances are the food service industry has other plans.

Here are five key areas you should incorporate into your business model heading into the next year.

1. Focus on Convenience

A third of Americans have cut down on dining out and ordering in. With the rising costs of everyday items, it's important to incentivize customers by making dining out or ordering in as convenient as possible.

Have your menu items on third-party delivery apps so they are easily accessible and customers aren't required to take extra steps. When dining in, ensure you offer contactless payments. 68% of Gen Z and 78%of Millennials in the US prefer QR code menus. They are placed on the table or door and ordered via the smartphone.

Concerning your restaurant's menu, offer various dietary alternatives and include allergen information. You want the experience to be as straightforward as possible!

2. Embrace Technology

We mentioned contactless payments, but that's just the beginning. A reluctance to adopt new technology holds your restaurant back and makes it harder to deliver a strong dining experience.

Having said this, like all things in this industry, prioritize quality over quantity. Incorporating too many technology processes can overwhelm both your staff and customers, leading to a decrease in service quality.

Choose technology that integrates smoothly into your current operations without complicating it, and train staff on how to use it.

3. Establish an Online Presence

Did you know 90% of customers look up a restaurant before visiting? Now, imagine how many customers you're missing out on without an online presence. Whether it be on social media, your own website, or reviews, being accessible online is really important heading into 2025.

Start by creating a professional, user-friendly website that includes important things like your menu and location. Add an about us section so customers know what to expect in terms of atmosphere and service style.

Social media is an incredibly powerful way to reach new customers. Platforms like Instagram and FaceBook allow you to post images, videos, and text posts to highlight promotions. Social media allows you to get involved with the local community, too.

4. Update Your Pricing Strategy

Pricing is a huge challenge that all restaurants need to consider. Updating your pricing strategy is essential to stay profitable without alienating your customers.

Start by analyzing your menu and pinpointing high-margin items or popular dishes for which customers are willing to pay more. Focus on optimizing these to balance your costs and revenue.

Be transparent about price adjustments and how they benefit service and food quality. Also, consider offering value-focused options like discount family-style meals.

Finally, a great tip that can make a big difference is to repurpose ingredients across multiple dishes to reduce waste and food costs. It also encourages you to be creative with your menu and offers delicious food aligned with your theme.

5. Look to Other Restaurant Brands

Finally, look to local businesses for inspiration. You're all in the same boat and can learn a lot from one another regarding pricing and marketing strategies.

Visit their restaurant and/or research online to see their establishment through the lens of a customer, not a competitor. Read reviews to gauge how customers feel about certain aspects of the restaurant and whether you can avoid the same mistakes.

Restaurant Business Model Built for Success

It's not easy being a restaurant. The industry is dynamic and ruthless but equally rewarding. Your business model has gotten you this far, but to stay in the game, it's time to reevaluate.

Paying attention to the biggest trends of this year and projections for what's to come is a brilliant way to tweak your model and embrace change. Customers are looking for healthier options and cheaper price tags, technology is evolving at a dizzying rate, and ghost kitchens are rising; what's next?

It's difficult to say for certain what 2025 will bring for restaurants, but with the information in this article as a guide, you'll handle it with no problem. To guarantee you rise above industry challenges, try Toast's POS demo today.

FAQ

What kind of business model is a restaurant?

A restaurant is basically a business-to-consumer (B2C) model, where you serve food and drinks directly to customers. It can include dine-in, takeout, delivery, or a mix of these options. The main goal is to provide great food and service while controlling costs.

How do you choose a business model?

Picking a business model depends on who your customers are and what they want. Think about things like your budget and what makes your restaurant unique. Whether fast-casual or fine dining, it’s all about what fits your vision and audience best.

What is the most profitable restaurant business?

Fast-casual and quick-service spots are usually the most profitable because they have lower costs and can serve a lot of people quickly. Think of places with simple menus and efficient setups—those tend to make good money. Overall, it all depends on location and how well you manage your business.