Understanding Revenue and How to Calculate It in the Culinary Business

Revenue in the culinary business is one of the essential indicators showing how much income a restaurant or other food business generates.

Understanding revenue accurately can help you make better decisions in managing your business, from planning expansion to improving marketing strategies.

So, how do you determine the proper calculation of revenue for your business? Let’s dive into the details.

What Is Revenue in the Culinary Business?

Revenue, or average income, refers to the total amount of money your business generates within a specific period—daily, weekly, monthly, or yearly.

This figure is also commonly referred to as "average gross profit" since it includes all sales revenue from various sources, such as food, drinks, merchandise, and other income—whether from on-site dining or online orders.

Revenue differs from profit margin, which focuses more on net profit after deducting all expenses, such as labor costs, rent, and raw materials.

Revenue gives an idea of the potential income generated, while the profit margin provides a more comprehensive view of your business's overall financial health.

How to Calculate Restaurant Revenue?

You can calculate restaurant revenue using several straightforward methods.

One commonly used approach is by estimating revenue based on table data and customer turnover rates.

Steps to Calculate Daily Revenue:

• Determine the number of tables in the restaurant. For example, you have ten tables.
• Calculate the table turnover rate, i.e., how many times tables can be occupied in a day. If each table is filled 10 times a day, your restaurant has 100 table turnovers per day.
• Determine the average bill per table. For instance, the average bill per table is Rp 100.000.

Using this data, you can calculate the restaurant’s daily revenue as follows:

If the restaurant has 10 tables, a turnover rate of 10 times, and an average bill of Rp 100.000, then:

To calculate monthly revenue, multiply the daily revenue by 30 (the number of days in a month). In this example, the monthly revenue would be Rp 300.000.000.

However, keep in mind that this calculation provides only a rough estimate. Seasonal fluctuations, such as holidays or tourist seasons, can affect revenue.

Additionally, you should consider price variations for lunch, dinner, or breakfast menus.

Read more: Understanding the Difference Between Cost of Production (HPP) and Cost of Goods Sold (COGS)

Calculating Restaurant Profit Margins

While revenue provides an overview of total income, profit margin focuses on how much profit you make after covering operational costs.

To calculate the restaurant’s profit margin, use the formula below:

For instance, if your total sales in a month are $30,000 and total operating expenses, such as wages, rent, and raw material costs, reach $25,000, then:

A higher profit margin indicates that your business is more efficient at generating profit relative to its expenses.

Quick-service restaurants usually have a profit margin of around 17%, while full-service restaurants, with higher operational costs, may have a profit margin of 5 to 10%.

Why is it Important to Calculate Revenue and Profit Margin?

Knowing your restaurant’s revenue and profit margin is essential for several reasons:

• Business Planning: Revenue helps you plan expansion or capacity increases, while profit margin allows you to assess profitability.
• Marketing and Menu Decisions: Use this data to adjust pricing, design new menus, or implement more effective loyalty programs.
• Investor Appeal: If you plan to seek investors or loans, they will want to know your restaurant’s financial performance.

Tips to Increase Restaurant Revenue and Profit Margin

1. Increase Sales Volume

• Build an Online Presence: Ensure your restaurant is easily found online, complete with ordering features.
• Evaluate the Menu: Analyze the most popular menu items and promote them more effectively.
• Loyalty Programs: Offer incentives like discounts or rewards for loyal customers.

2. Reduce Operational Costs

• Minimize Waste: Optimize the use of raw materials to avoid waste.
• Employee Efficiency: Use technology, like POS systems, to assist staff.
• Negotiate with Suppliers: Secure better prices for raw materials through negotiation.

Read more: COGS in Business: Definition, Calculation Methods, and Management Strategies

Conclusion

Utilize Point of Sale (POS) systems like ESB POS and ESB POSLite, which can help you automate all transaction records. Streamline your business processes with ESB Core ERP System, equipped with a comprehensive dashboard.

You can monitor your restaurant's financial performance in real-time. This system also makes managing online orders, takeout, and operational expenses more accessible.

With accurate information, you can make better decisions to increase revenue and profit margins.