I know this is a really broad question, but my friends usually ask me since I have owned, operated and invested in various restaurant concepts over the years. I sometimes find it difficult to give a straight answer, but I’ll try to give some specific averages that I know to be true.
In a broad sense, the average restaurant has profits of $180,000 in EBITDA. That is Earnings before interest, taxes, depreciation and amortization. The EBITDA profit margin is 12% on average sales of $1,500,000 to get to $180,000.
But wait, I thought the average restaurant was a failing operation? The old adage is that “the easiest way to $1,000,000 is to start with $2,000,000 and open a restaurant”
For the purposes of this exercise, I have assumed many averages, part of which is dependent on a successful operating restaurant concept.
How Much Does the Restaurant Owner Make?
Once again, we have to make a few assumptions to get to the owner’s take home pay. If we assume EBITDA of $180,000 and a marginal tax rate of 25%, the restaurant owner would make $135,000 after taxes.
Some of those items that we left out of EBITDA could be important. Many restaurants are not purchased with cash but do assume some sort of debt. Let’s say that the owner of the restaurant took out a $500,000 loan and was paying 8% interest on that $500,000. The interest on the loan would amout to $40,000 per year. Profits after interest and taxes would then be $105,000.
Profits in Fast Food
Fast food (or quick service) restaurants tend to do quick and high volume but lower average checks. From concepts we have looked at, the average sales are a little lower than the average restaurant with average sales of $1.2 million. At a 12% EBITDA margin, that is $144,000 in average profits for a fast food concept.
Profits in Fast Casual
Fast Casual concepts tend to have higher volumes than fast food (or quick service restaurants) Average sales at fast casual concepts averages $1.5 million. That said, there is also a lower profitability associated with fast casual, at 10-11%. At 11% EBITDA, that is $165,000 in average profits for a fast casual restaurant location.
Profits in Casual Dining
Casual and family dining restaurants have even higher average volumes. With customers sitting down for larger and more expensive meals, the average restaurant sales are around $3 million.At an EBITDA margin of 11.8%, that is $354,000 in average profits for a casual or family dining restaurant.
Restaurant Franchise Profits
The major difference in a franchise are the ongoing fees associated with and paid to a franchise company. These fees are typically royalties and advertising fees. It is arguable whether or not you would spend these amounts if you owned a brand outright.
If you would like to learn more about Restaurant Franchises:
Click Here to read about Franchise Costs and Profitability and how to read a Franchise Disclosure Document (FDD)
How much does the Manager Make?
There are many forms of restaurant managers. What most people would consider the manager of a restaurant is the person that leads the operations of a single store while working in the store. From our experience, the average restaurant general manager salary ranges between $40,000 to $60,000.
In many restaurant brands, there are also other usual types of restaurant managers. Another typical restaurant manager in the store is in the form of an “Assistant Manager” or “Shift Leader.” Both of these are typically hourly employees that make a few dollars per hour more than the typical employee.
In large restaurant companies, there are also store manager roles known as “Area Coaches”. Area coaches typically manage 5-8 store level general managers for an entire city or territory. We have seen average salaries for area coaches from $60,000 to $100,000+, depending on the size and brand of the restaurant operations.