Restaurant Profit Margin Benchmarks
Restaurants typically operate with gross margins of 60-70% and net margins of 3-6%. Full-service restaurants tend toward lower net margins, while fast-casual and food trucks can push higher.
| Metric | Low | Average | High |
|---|---|---|---|
| Gross margin | 55% | 65% | 75% |
| Net margin | 0% | 5% | 10% |
| Markup | 150% | 200% | 300% |
| Typical annual revenue | $250,000 – $2,000,000/year for most independent restaurants | ||
Key cost drivers
- Food costs (28-35% of revenue)
- Labor (25-35%)
- Rent and occupancy (6-10%)
- Utilities and supplies (3-5%)
Industry insights
- Food cost is the single largest expense. Keeping food cost below 30% of revenue is a common target.
- Labor costs above 35% usually signal overstaffing or scheduling inefficiencies.
- Prime cost (food + labor) above 60% makes it very difficult to achieve strong net margins.
- Alcohol sales carry 70-80% gross margins and significantly improve overall profitability.
Tips to improve margins
- Track food cost percentage weekly, not monthly, to catch waste and theft early.
- Menu engineering: highlight high-margin items and reduce or reprice low-margin dishes.
- Negotiate with suppliers quarterly, especially for high-volume ingredients.
- Cross-train staff to cover multiple roles during slow periods.
Related guides
Go deeper with in-depth guides on the concepts behind these restaurant benchmarks.
Compare your numbers
Profit Margin Calculator
Calculate profit, margin percentage, and pricing health from cost and revenue.
Gross Margin Calculator
Calculate gross profit and gross margin from revenue and COGS.
Break Even Calculator
Find how many units or sales dollars you need to cover costs.
Tools & templates for Restaurant
Data quality and assumptions
Last updated: June 2026Formula
Gross margin = (Revenue − Cost of Goods Sold) ÷ Revenue × 100. Net margin = (Revenue − Total Operating Costs) ÷ Revenue × 100. Markup = (Selling Price − Cost) ÷ Cost × 100.
Data sources
NYU Stern School of Business Restaurant Industry Report; IBISWorld Industry Reports; National Restaurant Association data. Ranges are illustrative — actual margins vary by concept, location, and scale.
Limitations
These benchmarks are based on publicly available industry aggregates from NYU Stern, IBISWorld, and the National Restaurant Association. Your actual margins may differ significantly based on cuisine type, service model (quick-service vs. fine dining), location, and scale.
Key assumptions
- COGS includes food ingredients, beverages, and direct supplies
- Operating costs include labor, rent, utilities, marketing, and administrative expenses
- Revenue figures reflect independent restaurants, not national chains
Methodology
Data compiled from industry surveys and academic research. Gross margin represents revenue minus direct food and beverage costs. Net margin includes all operating expenses. Ranges reflect typical independent restaurant performance.
Calculate your Restaurant profit
Use the calculator below to see how your restaurant margins compare to the benchmarks above.
Frequently asked questions
What is the average restaurant profit margin?+
The average net profit margin for restaurants is 3-6%. Fast-casual concepts can reach 6-9%, while fine dining may be lower due to higher labor and overhead costs.
What is a good food cost percentage?+
Most restaurants target 28-32% food cost. Quick-service restaurants can push lower, while upscale restaurants often run 32-35%.
How can I increase my restaurant's profit margin?+
Focus on the three levers: increase average check size, reduce food waste and labor costs, and optimize your menu mix toward high-margin items.
What is prime cost?+
Prime cost is the sum of food cost and labor cost as a percentage of revenue. The target for most restaurants is 55-60%.