The idea of opening a new restaurant can be daunting. On top of finding and securing a location, executing an interior design, and finalizing the menu, you also have to set realistic revenue goals, decide how much staff to hire, and plan out your overall finances. Every new restaurateur needs to plan ahead for their business, but how can you if there are no previous average restaurant sales to go by?
Luckily, there are ways for brand new restaurants to calculate a decent estimate for their earnings over the first year in business. This calculation might not predict your exact amount of revenue for the next 12 months, but it can give you a sense of where you should be and targets of average restaurant sales to aim for as you go. (And if you already have a restaurant, and just want to get an estimate on the competition, these tricks will work well for you, too.)
A straight forward way to estimate number of guests to expect is to count how many tables you have and plan for about three-quarters of those tables to be filled at your busiest times in your first year out. By imagining 75% of your seats needing service during peak hours, you can plan out the necessary employees per shift. Factor in the likelihood of 2-3 table turns per shift, and you also have a fair recipe for determining amount of ingredients per shift based on your menu offerings.
To give this estimate more context for your location, check out other restaurants in your area, particularly ones that are similar to your own restaurant’s serving style and overall size. Check out how many covers your future competitors go through during their busiest times of day. If you can, ask the manager or your server what their weekly covers are like. At the very least, this will give you a sense of your potential when it comes to the amount of guests coming in on any given day or week — and ultimately, your average restaurant sales.
Estimating Average Ticket
So, you have your estimate for customer count. Now it’s time to calculate an average check price per person. Do this by looking at your menu prices — specifically the median prices within your menu (not the most or least expensive dishes). If you’re open primarily for lunch, be aware that lunch shifts generally have lower check totals, whereas dinner shifts tend to have higher ones. Your estimates (not to mention competitive menu prices) should reflect this.
Estimating Weekly Sales
All that being said, estimating weekly guest spending for a new restaurant comes down to:
- Multiply your estimates for the number of guests per shift by the average ticket for that shift
- Add the shift revenues together (breakfast, lunch, dinner) for the daily guest spending estimate
- Repeat the process for every day of the week
- Add each day’s totals together
Weekly Average Restaurant Sales =
(number of guests) x (average ticket per shift) x (number of shifts) x 7
One word of warning: your sales could vary drastically depending on the day of the week (weekdays compared to weekends, Mondays compared to Thursdays or Fridays, etc.). Best to calculate each shift and day’s total individually.
Consider creating a spreadsheet to keep these numbers organized. It will come in handy over time to see how close to the mark your estimates were. Adjust up or down accordingly.
Estimating Annual Sales
There are a few loose ways to figure out your potential sales for the first year of your restaurant. The first is very simple: take the weekly average restaurant sales total you calculated above and multiply that number by 52.
This method works best if you expect your weekly sales to be fairly consistent throughout the year. However, if your area’s restaurants see seasonal fluctuation of sales — most restaurants not in tourist areas see a slump in the summer, for instance — simply grabbing one week’s estimate and multiplying it throughout all the weeks in a year might give you a misleading conclusion.
If you’re concerned that fluctuation could be a factor in your average restaurant sales estimate, consider dividing the year out by the season. This makes the annual sales estimate more complicated to calculate, but can be beneficial if you want a clearer sense of your likely average restaurant sales in each part of the year. From there, you can start to plan out what your busy weeks and less busy weeks will look like.
Don’t be afraid to consult with restaurant owners or managers that have been working in your area for longer. As long as you keep the conversation to high level sales behavior, they might be able to help you properly estimate your traffic throughout the year. And if the original financial goals in your business plan don’t match up with their numbers — or your actual sales — the best thing to do is start making adjustments to your marketing and operation choices.
And remember, the more conservative you can be in your first year on projections toward staying on budget, the more likely it is you’ll be able to look back and see success in the rearview mirror.
How to Use Your Yearly Estimate
Want to know if your estimated yearly revenue is enough? There are some ways to figure out how much you should be making within your first year, compared to what you predict you will be making.
First, what’s the square footage of your restaurant’s dining area? Here’s a little trick to figure that out: count the ceiling tiles in the dining area. A standard ceiling tile is usually either 12 by 12 or 24 by 24 inches. Once you can determine how many ceiling tiles wide and long a dining room is, you can multiply and get the square feet for your dining room.
Now, divide your calculated annual sales number by your square feet. See where they fit within the results below:
For Full Service Restaurants
- $150/square foot or less could mean little chance of generating a profit
- $150 to $250/square foot should break even (up to 5% of your sales is profit)
- $250 to $325/square foot should drive 5% to 10% of sales in profit
For Limited Service Restaurants
- Under $200/square foot could mean little chance of generating profit
- $200 to $300/square foot should break even (up to 5% of your sales is profit)
- $300 to $400/square foot should drive 5% to 10% of sales in profit
How do your numbers fare? If you fall into the lower category for your type of restaurant, you might want to look at your menu and overall plan for your restaurant in its first year and adjust accordingly.
Need some more ideas for driving that weekly revenue up? We’ve got four big ones right here: