What is the Average Restaurant Revenue for a New Restaurant?

Dahlia snaiderman

Dahlia SnaidermanAuthor

Before opening a restaurant or expanding to another location, restaurant owners should estimate food costs, labour costs, and gross profits based on forecasts of total sales and average restaurant revenue over a given period of time.

Average restaurant revenue is a critical KPI that profitable restaurants measure on a regular basis — with average restaurant profit margin being another critical metric.

These measures can help restaurant owners make more informed decisions about strategic menu prices, cost of goods sold (or COGS), and overall profit margins, as well as margins for individual menu items.

In this article, you’ll learn what the average restaurant revenue is for a new operation, how all restaurant sizes can benefit from tracking total revenue, costs, and profits, and how to calculate these critical metrics for your operation.

What is restaurant revenue?

Revenue is the money that comes into your business through any of your revenue streams. This includes food sales, beverage sales, merchandise, online orders, phone orders, gift cards, consumer packaged goods, and more. Not to be confused with gross profit margin

Gross profit is the amount of revenue left over after subtracting your COGS. 

Profit margin is the amount of revenue left over after subtracting all your operating expenses — including food, labour, and more. It’s presented as a percentage of total sales.

icon RESOURCE

Restaurant Metrics Calculator

Use this free calculator to calculate the key restaurant metrics needed to understand the health and success of your business.

Toast

What is the average revenue for a new restaurant under 12 months old?

Like everything in the restaurant industry, average revenue varies massively across types of restaurants, regions, sizes, and service models. A fast-food restaurant and a fine dining establishment are such different business models that it’s hard to compare one to another.

When reviewing your restaurant business plan, the best way to roughly calculate what you can expect in revenue is to ask your peers who have similar establishments — the same concept, in the same area, with a similar capacity and menu style. 

Restaurants in the UK average between £100,000 and £250,000 in annual revenue. Newer establishments can anticipate lower figures because the startup phase is typically a slow burn. 

On the flip side, a new location of a multi-location restaurant may have somewhat higher revenue than a brand-new one because the brand is already known and trusted in a community and its restaurant management practices are already proven.

Boosting restaurant revenue is a top concern for restaurateurs

Accurately forecasting average restaurant revenue is critical for restaurant business owners planning to open more locations or new concepts — which is actually a growing number of restaurant owners compared to last year.

1. Understanding your short-term and long-term growth plan and its impact on restaurant sales and yearly revenue.

Toast’s Voice of the Restaurant Industry shows that approximately 29% of restaurants we surveyed say they are very likely to expand their restaurant locations in the next 12 months. That’s up from just 17% of restaurants we surveyed in 2022.

While this should not be interpreted as a projection for the number of restaurants opening next year, it’s positive to see that respondents have an optimistic outlook for the future of the industry. 

Operators have two ways to expand their customer base with new business opportunities — this includes adding additional locations or introducing new concepts. These are the two significant strategies for growth at the location level.

You may want to determine whether adding new locations aligns with your long-term goals and aligns with market demand. For example, food trucks may want to expand their existing concept into a brick and mortar with dining room and all. Or fine dining restaurants may want to expand into a quick-service restaurant serving BBQ or something else with higher profit margins.

Consider factors such as location selection, market research, menu offerings, startup costs, total expenses, and funding requirements.

2. Which tactics can help increase restaurant sales?

Boosting restaurant sales is a key objective for any business — and that includes sales across multiple dining experiences.

Restaurant operators say they are having the most difficulty managing multiple service channels. Thankfully, an all-in-one point of sale, or POS system, that integrates multiple service channels into a single screen (like Toast) can help alleviate the pain points with third-party service channels. 

In addition to new service channels, operators can explore different tactics to attract more customers and increase sales. This may include marketing campaigns, loyalty programs, partnerships with local businesses, promotions and specials for dine-in and takeout, and optimising menu pricing and offerings. 

Analyse sales data and customer feedback to identify opportunities for upselling, cross-selling, and improving average bill sizes.

3. What strategies can help boost profit margins?

Profitability is essential for the long-term sustainability of your restaurant. It’s the bottom line that offers the most important benchmark for restaurant owners.

As operators assess their businesses, Toast asked decision-makers what goals they have for their restaurants over the next year. Improving profitability was most marked as the highest importance, with 34% of respondents saying their margins are their priority.

Operators can help encourage greater net profit margins by evaluating current cost structures and identifying areas for cost optimisation. This may involve renegotiating supplier contracts, optimising inventory management, reducing waste, enhancing operational efficiency, and implementing technology solutions for better financial control and reporting. Don't overlook the importance of accurate budgeting, forecasting, and monitoring of key financial metrics.

If cost controls are one side of the profitability pendulum, then strategic pricing is the other side. Revamping menu price strategies can also help with growing profitability.

How to Estimate Revenue for a New Restaurant Concept

The amount of revenue your new restaurant will generate is contingent on dozens of factors, including your location, your menu prices, your concept, and the number of tables you have.

Average Restaurant Revenue for a Second Location 

If you’re opening a second location and not starting fresh, you’re at an advantage: You already know how much revenue your first location brings in and are all too familiar with the factors that can impact revenue, like seasonality, events, or unexpected occurrences (like a pandemic). 

Whether your goal is to open a new location, invest in new equipment, or just manage cash flow over the next few months, be sure you have a reliable source of funding to make your dreams a reality. 

The best way to estimate how much your new restaurant or new location will bring in is to calculate your restaurant’s monthly revenue, and then calculate what 75% capacity could look like at your business because that’s what you can expect within the first year of business. 

To start, you’ll need to know your restaurant’s daylong capacity for covers and the average ticket size.

Capacity for covers is easy to calculate — how many guests you can accommodate in your restaurant multiplied by how many table turns you average. For example, if you have 80 seats, and throughout the whole day (lunch and dinner shift), each table can usually host six different parties, you've got a capacity of 480 covers a day. 

Next, calculate the average order amount. This is where the advantage of the second location comes in: You already know the average order amount at your first location, and if you don’t, you can use sales data from your first location to easily calculate it. If your restaurant point of sale keeps sales data, it can probably tell you this information easily. But if you’re calculating it yourself, here’s how:

For a full week, add up all the lunch tickets and divide by how many tickets there were, then add up all the dinner tickets and divide by how many tickets there were. Add the two numbers together and divide by two. 

By doing a full week’s worth of sales calculations, you balance out the Mondays with the Saturdays in terms of order behaviour and volume.

Example:

Monday average lunch ticket: £20 

Tuesday average lunch ticket: £18 

Wednesday average lunch ticket: £20 

Thursday average lunch ticket: £35

Friday average lunch ticket: £45

Saturday average lunch ticket: £55

Sunday average lunch ticket: £70

Lunch average: [20 + 18 + 20 + 35 + 45 + 55 + 70] / 7 = £37.57

Monday average dinner ticket: £60

Tuesday average dinner ticket: £58

Wednesday average dinner ticket: £60

Thursday average dinner ticket: £85

Friday average dinner ticket: £150

Saturday average dinner ticket: £150

Sunday average dinner ticket: £80

Dinner average: [60 + 58 + 60 + 85 + 150 + 150 + 80]  / 7 = £91.85

Ticket size average: [37.57 + 91.85] / 2 = £64.71

Now you can finally find out your potential monthly revenue. 

If you do catering or merchandise sales, be sure to take them into account as well. Find out how much you sell every month in merch or catering and add this to your total monthly revenue. 

Final formula: 

[Average ticket size x # of daily covers x number of day in the month] + [monthly catering or merch revenue] = total monthly revenue

Total monthly revenue x 0.75 = projected total monthly revenue for a new business

Average New Restaurant Revenue

If you’re starting anew, there’s a lot more estimation to be done when figuring out your potential revenue. You won’t know your customers’ ordering behaviour until they get in the door, and you won’t know how quickly your servers can turn tables yet. 

However, you do know your restaurant’s capacity, so that’s where to start. 

Say we’re dealing with the same restaurant as above, with 80 seats.

For a full-service restaurant, average table times can range between 45-90 minutes or longer. You can figure out your rough estimate by thinking about what kind of experience you’re trying to provide. 

Are your dishes made to order or mostly pre-prepared? Will you serve multiple courses or a prix fixe menu, or will it be more casual and quick? Once you have your ideal table turn time, figure out how many times you’ll be able to turn each table throughout the day, including a lunch and a dinner shift.

Then, take your capacity (80 seats) and multiply it by the ideal average number of table turns per day. That’s your number of potential covers. 

Finally, you’ll need to estimate your average bill size. You can go through your menu and try to predict which types of items will sell more at different times and mock-up an average lunch ticket and average dinner ticket, but a more exact way to go about this is to ask a peer in the industry with a similar concept how much their average ticket size is. 

Once you have that number, the formula is the same as for a new location:

Final formula: 

[average ticket size x # of daily covers x number of days in the month] + [monthly catering or merch revenue] = total monthly revenue

Total monthly revenue x 0.75 = projected total monthly revenue for a new business

How to boost revenue in a new restaurant 

If you’re thinking about how to increase restaurant sales and overall revenue in your new location or brand-new restaurant, there are many things you can try. You can create a promotion where guests of your new business are given 10% off their bill of £50 or more. You can also throw an epic grand opening (which is most effective when they’re over several weeks), find ways to increase your table turns, host community events, trivia nights, or live music, and train your front-of-house staff to upsell effectively. 

Predicting restaurant revenue can be challenging. But it’s much easier if you follow a methodical approach.

If you’re expanding, you can use the data you have from your first location, and put all your long-tested best practices into place from the beginning to set you up for success on your expansion journey. If you’re starting new, talk to your peers and ask for advice wherever you can.

One final word of advice: It’s always better to over-prepare and budget more than you think you need because it can take time to set up and maximise your revenue streams.

Toast is here to help

There’s no one right answer when asking how to increase restaurant sales and boost your bottom line. It depends completely on your unique restaurant operation, including the maturity of your business, your goals, your target market demographics, and your existing restaurant tech stack.

Toast is here to help you along your journey. 

Toast is the point of sale system built for restaurants — for ease, for speed, for reliability, for more sales, and most of all, for you. And also with Toast, point of sale is just the beginning.

The entire Toast system — from handhelds and displays to scheduling, reporting and multi-site management — works together to make over 93,000* restaurants even better.

Reach out today to learn more about Toast’s point of sale and suite of products.

*as of June 2023

Is this article helpful?

DISCLAIMER: This information is provided for general informational purposes only, and publication does not constitute an endorsement. Toast does not warrant the accuracy or completeness of any information, text, graphics, links, or other items contained within this content. Toast does not guarantee you will achieve any specific results if you follow any advice herein. It may be advisable for you to consult with a professional such as a lawyer, accountant, or business advisor for advice specific to your situation.