Updated: Oct 26
While the booming restaurant industry has made it easier than ever to open your own restaurant, the average profit margin is relatively small, falling between 2-6%. However, that doesn’t mean you can’t be successful in starting your own restaurant. In fact, certain types of restaurant models have a higher likelihood of success, being more profitable or easier to run than others. Knowing what those are can make all the difference when deciding on a new investment or career path in the restaurant business. While there are many factors to take into account when choosing the right type of restaurant business— here are the 8 most profitable restaurants for entrepreneurs looking to start out in the industry:
If you are looking to open a restaurant, one of the most profitable options is a food truck. A food truck is a vehicle equipped with a kitchen that functions as a mobile food vendor. These restaurants can be found all over the country, especially in major cities such as New York City and Los Angeles, but have become so popular that new ones are opening up every day! More importantly, their menu options are often creative, since the informal setting allows chefs to experiment with different ingredients while being able to reach customers quickly. A report by smallbizgenius claimed that over 34% of food truck chefs regularly experiment with their menus.
Based on a study by Food Truck Empire, more than half of the food truck vendors surveyed responded that they have earned $150,000 or more from their mobile food units. Although it may not seem like a high-profit number, food trucks require less real estate and have lower overhead costs compared to brick-and-mortar restaurants.
Coffee shops are a great choice for restaurant owners looking to open their own businesses. They’re easy to start and can be highly profitable compared to a restaurant.
A typical coffee shop usually serves both beverages and pastries. Most cafes run at a gross margin of 75-80% or even higher. Although successful owners can easily make 6 figures from anywhere from $60k-$160k annually, only 33% of coffee shops last more than 10 years. Therefore, a strategic marketing plan and technology will put your shop on the road to success if you do it correctly. A self-ordering kiosk can be extremely helpful when it comes to a busy store. It allows people to order their own coffee drinks, sending the order to your prep team faster and more effectively. You can increase your profit margins by reducing the number of employees taking orders at the register.
Coffee shops also require less start-up capital than other types of restaurants, since you don't need many employees or large kitchens and dining areas, especially when compared to other types of restaurants like pizzerias or burger joints. You may even be able to find an existing location that already has some furniture built in (like tables) which will save money on construction costs right away. If you are interested in opening a cafe in your area, don’t forget to check out our detailed guide on how to open a successful cafe!
This may come as a surprise, but bars have the highest profit margins in the restaurant industry. While the restaurant industry is still slowly recovering from the impact of Covid-19, the bar and nightclub industry in the United States has grown to become one of the most lucrative parts of the larger food and drinks services industry. Although the startup costs for opening a bar are high, alcohol has the highest markup prices, which helps rake in high gross profit margins. Adding to the existing high profitability behind the bar industry, the market size is expected to grow by 16.4% in 2022. In contrast to the 3-5% net profit margin for restaurants, the average net profit margin for a bar is between 10 and 15%. However, this can be varied according to the type of bar you hope to run, and here’s a breakdown for you.
Bar & Grill Profit Margin
A typical bar & grill serves both food and drinks. However, food typically has a lower profit margin than alcohol, since food is not as heavily taxed as alcoholic drinks. Furthermore, the average startup cost and commission fees for operating a restaurant is significant, never mind the overhead costs of maintaining a kitchen, obtaining permits, and employing skilled food service workers.
Bar & Grill owners typically recoup their costs through promotional events such as happy hours, which will increase their profits through alcohol. Studies have shown that when the average restaurant net profit margin is subtracted from the average bar net profit margin, the average net profit margin for a bar and grill is 7–10% on average.
Pub Profit Margin
The net profit margins for a neighborhood pub are in line with the industry average for bars, which is between 10-15%. Most pub profits come from the sale of beer and alcoholic beverages, assuming that food is not served on the premises. However, pubs that serve food will have the profit margins of a traditional bar and grill.
Wine Bar Profit Margin
The rate of growth in the wine industry is significant with a healthy profit margin. In the case of wine bar establishments, you can expect a typical restaurant profit margin of 7–10%, around the same as your standard bar. However, that can be raised significantly with the inclusion of a wine bar and wine shop. Such a simple formula and business model allows guests to buy, order, and enjoy wine in the same environment, fulfilling customer demand with fast and efficient service. While the gross profit margin of a wine shop will be lower than the gross profit margin of a wine bar, the net profit margin will be higher, since more wine will be sold through retail than being served at the bar.
The wine industry is one of the most profitable sectors in the hospitality industry, notwithstanding the operating costs. The average cost of wine is higher than the average cost of beer and liquor, especially since the markup on wine by the glass and wine prices can be quite high. Furthermore, a wine bar has fewer overall expenses than a bar- operational costs, labor costs, and utility costs are significantly lower since there is no need to maintain an expensive draft beer system or calculate how many beers are in a keg for inventory purposes, while bar equipment such as a three-compartment sink is not required.
Although many restaurants are still struggling with the after-effects of the pandemic, fast casual restaurants have become increasingly popular and established a stronger presence than ever. Experts believe the fast-casual restaurant market is expected to reach $209.1B by 2026, compared to $125.6B in 2019. This continuous growth is a signal for many investors and entrepreneurs to keep a close eye on this restaurant trend for future opportunities and investment.
Fast casual is a type of restaurant that falls between fast food and full service. Unlike fast food, it's not a drive-thru and you don't usually get your food in minutes. It's more like a sit-down restaurant with an order-at-the-counter option for those who want to save time. Although the menu prices are relatively higher than fast food restaurants, it is still considered an affordable option for customers looking for casual dining. You'll also see a limited menu, meaning that there aren't several options for each meal item, indicating the focus on quality over quantity.
While pizzerias are often small, family-owned businesses, they can be profitable due to the low cost of ingredients. In 2021, there were 75117 pizza restaurants in the United States, with the industry generating approximately $45.59B in sales.
Pizzerias have been around for hundreds of years; their popularity hasn’t wavered since their introduction in as early as 12th century Italy. While many pizzerias are small neighborhood joints that make good money serving local customers who know exactly what they want when they walk through the door (and how much it will cost them), some larger chains have recently begun experimenting with dine-in locations as well as drive-thru windows, where customers can order food without getting out of their vehicles at all.
Quick services restaurants(QSR)
According to a recent report, the QSR market size was at $259.17B in 2019 and is expected to grow at a 5.1% CAGR from 2020 to 2027. This insight indicates that QSR restaurants are a profitable restaurant type to consider, with room to grow. Quick service restaurants(QSR) are known for their convenient and quick food services with affordable price points. Customers can either order it through the drive through window or the counter. Some of the most well known QSR you may already know including Mcdonald’s, KFC, and In-N-Out Burger, etc.
Although many people might question whether QSR can’t provide high profitability due to the low cost of each sale, the main priority is to obtain a high volume of orders and adapt technology, such as self-ordering kiosks that could help your restaurant be more efficient. Once you can do that, you will be able to reach an average profit margin of approximately 6-9% compared to other restaurants overall, which have an average profit margin of 2-6%.
With one of the most innovative self-ordering kiosks from INFI, you can easily increase the productivity for your restaurant by lowering labor costs and making ordering food faster and easier.
If you have a tight budget or don't want to spend money on startup capital or rent a physical location for your restaurant, operating a ghost kitchen might be an option. A ghost kitchen is an emerging restaurant concept that doesn’t have an actual storefront or servers. Orders and transactions are placed online and the restaurants operate on a delivery-only basis. This new business model has ensured that restaurant owners have much lower running costs through using ghost-kitchen POS systems and focusing on takeout services, which eliminates rental and maintenance fees for an actual physical dining space, as well as labor costs for service staff.
In order to lower the operating costs for the restaurant, one tip will be creating your own website and mobile app for online ordering. At INFI, we help restaurants to build their own restaurant website and mobile app to avoid extra cost from third parties platforms, such as Doordash, and Uber Eats, etc. This will not only enable lower operating costs, but also ensure higher profits for your restaurant.
Breakfast foods are immensely popular, easy to prepare with little to no need for expertise, and can be made with some of the most affordable and basic ingredients as well. Furthermore, restaurants that offer breakfast items tend to get higher traffic. With low food and labor costs, coupled with high customer demand and traffic, restaurants that operate on a business model specifically focused on breakfast can be very profitable.
This is especially true for businesses that operate for extended hours and provide breakfast staples like bacon, eggs and pancakes throughout the day. A National Restaurant Association survey showed that 55% of consumers would order breakfast items more often if restaurants offered them all day, with 37% of diners aged 18-35 preferring breakfast. Though there may be concerns that offering only breakfast will limit sales, extended service hours and menu options can help in that regard.
The 8 types of restaurants mentioned above are just a snapshot of the diversity of the restaurant business. With the right business plan and passions, you can pursue your dream of being a restaurant owner, regardless of the type of business you operate. Since the restaurant industry is continually evolving, you should always look for the right tools to boost sales and increase productivity. Whether your restaurant is a Mexican food truck in New York City or a QSR for grab-and-go in Los Angeles, digitalization is the way to go!
Here at INFI, we are committed to providing you with the technological solution you need for your restaurant. Whether you are looking to implement innovative self-ordering kiosks for your new fast casual restaurant, or looking to set up and develop mobile app/website functions for your ghost kitchen, you can rely on us to provide you with the products needed to boost efficiency, lower costs and reach new customers. Contact us to learn more details and information on how to boost your business!