23 data to include in the business plan of your fast food restaurant

This article was written by our expert who is surveying the industry and constantly updating the business plan for a fast food restaurant.

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Ever wondered what the ideal drive-thru efficiency rate should be to keep your fast food restaurant running smoothly?

Or how many orders per hour your kitchen needs to handle during peak lunch hours to meet your sales goals?

And do you know the optimal ingredient cost ratio for a fast food menu that maximizes profit without compromising quality?

These aren’t just nice-to-know numbers; they’re the metrics that can make or break your fast food business.

If you’re putting together a business plan, investors and banks will scrutinize these figures to gauge your operational strategy and growth potential.

In this article, we’ll cover 23 essential data points every fast food restaurant business plan needs to demonstrate you're prepared and poised for success.

Drive-thru sales can account for 60-70% of total revenue, making efficiency in this area crucial

Drive-thru sales can account for 60-70% of total revenue in fast food restaurants because they offer a quick and convenient option for customers on the go.

Many people prefer the drive-thru because it allows them to stay in their vehicles, which is especially appealing during bad weather or when they have children or pets with them. Additionally, drive-thrus can handle a high volume of orders quickly, which is crucial during peak hours when the restaurant is busy.

Efficiency in the drive-thru is essential because any delays can lead to long lines, which might deter potential customers from stopping by.

However, the importance of drive-thru sales can vary depending on the location and target market of the restaurant. For example, in urban areas with limited parking, walk-in sales might be more significant, while in suburban or rural areas, the drive-thru could be the primary source of revenue.

Speed of service should average 3-4 minutes per customer to maximize throughput and customer satisfaction

In a fast food restaurant, maintaining a speed of service that averages 3-4 minutes per customer is crucial for maximizing both throughput and customer satisfaction.

When service is too slow, customers become frustrated, which can lead to negative reviews and a decrease in repeat business. On the other hand, if service is too fast, it might compromise the quality of the food or the accuracy of the order, which also negatively impacts customer satisfaction.

By aiming for a 3-4 minute window, restaurants can strike a balance between speed and quality, ensuring that customers receive their orders promptly without sacrificing the dining experience.

However, this timing can vary depending on specific factors such as the complexity of the order or the time of day. For instance, during peak hours, a slightly longer wait might be acceptable if customers see that the staff is working efficiently, while during off-peak times, customers might expect even faster service.

Food cost should be kept below 25% of revenue due to the high volume, low-margin nature of fast food

In the fast food industry, it's crucial to keep food costs below 25% of revenue because these businesses operate on a high volume, low-margin model.

Fast food restaurants rely on selling a large number of items at relatively low prices, which means their profit margins on each item are quite slim. By keeping food costs low, they can ensure that they maintain a sustainable profit even when prices are competitive.

However, this percentage can vary depending on factors like location, menu offerings, and the specific business model of the restaurant.

For instance, a fast food restaurant in a high-rent area might need to keep food costs even lower to cover additional expenses. Conversely, a restaurant offering premium ingredients might have slightly higher food costs but can offset this with higher pricing or unique value propositions.

Employee turnover can exceed 100% annually, so invest in streamlined training programs to reduce costs

In fast food restaurants, it's not uncommon for employee turnover to exceed 100% annually, which means that the number of employees leaving the job can be greater than the number of positions available.

This high turnover rate is often due to factors like low wages and limited career advancement opportunities, which can make it difficult to retain staff. As a result, businesses face the constant challenge of hiring and training new employees, which can be both time-consuming and costly.

Investing in streamlined training programs can help reduce these costs by making the onboarding process more efficient and effective.

However, the impact of turnover can vary depending on specific circumstances, such as the location of the restaurant or the demographics of the workforce. For instance, a restaurant in a college town might experience higher turnover during the summer months when students leave, while a location in a more stable community might have a lower turnover rate. By understanding these nuances, businesses can tailor their training and retention strategies to better suit their unique needs.

Franchise fees typically range from 4-8% of gross sales, impacting overall profitability

Franchise fees, typically ranging from 4-8% of gross sales, can significantly impact the profitability of a fast food restaurant.

These fees are a percentage of the restaurant's total sales, meaning the more you sell, the more you pay. This can be a substantial cost, especially for new franchises trying to establish themselves in a competitive market.

However, these fees are often justified by the brand recognition and support provided by the franchisor, which can drive sales and customer loyalty.

The exact percentage can vary based on factors like the brand's reputation and the level of support offered, such as marketing and training. Some franchises might charge lower fees to attract new franchisees, while others with a strong market presence might charge higher fees due to their established customer base and proven business model.

Peak hours often occur during lunch and dinner rushes, requiring strategic staffing to handle volume

Fast food restaurants experience peak hours during lunch and dinner rushes because these are the times when most people are looking for quick and convenient meals.

During these periods, the volume of customers increases significantly, requiring strategic staffing to ensure efficient service. If a restaurant is understaffed, it can lead to longer wait times and a decrease in customer satisfaction.

To handle this surge in demand, managers must schedule more employees during these peak hours to maintain a smooth operation.

However, the specific timing and intensity of these rushes can vary based on factors like location and target demographic. For instance, a fast food restaurant near a business district might see a larger lunch rush, while one in a residential area might experience a busier dinner time.

Promotional items can boost sales by 10-20% but should be carefully managed to avoid margin erosion

Promotional items can indeed boost sales by 10-20% in a fast food restaurant, but they need to be managed carefully to prevent margin erosion.

When a restaurant offers a promotion, it can attract more customers, leading to increased sales volume. However, if the promotion is not well-planned, the cost of the promotional items can eat into the profit margins, especially if the discount is too steep or the promotion runs for too long.

It's crucial to find a balance between attracting customers and maintaining profitability.

The impact of promotional items can vary depending on factors like the type of promotion, the target audience, and the timing. For instance, a limited-time offer on a popular item might drive more traffic than a discount on a less popular item, and targeting the right audience can maximize the effectiveness of the promotion.

Drive-thru error rates should be below 2% to maintain customer satisfaction and repeat business

Drive-thru error rates should be below 2% to maintain customer satisfaction and repeat business because even small mistakes can significantly impact the customer experience.

When customers receive the wrong order, it can lead to frustration and disappointment, which may deter them from returning. Additionally, high error rates can damage a restaurant's reputation, as dissatisfied customers are likely to share their negative experiences with others.

Keeping error rates low is crucial for ensuring that customers receive what they expect, which builds trust and loyalty.

However, the acceptable error rate can vary depending on factors such as the complexity of the menu and the volume of orders. For instance, a restaurant with a simpler menu might be expected to have a lower error rate, while a high-volume location might be given a bit more leeway due to the increased pressure on staff.

Prime cost (food and labor) should stay below 55% of revenue for optimal financial health

In the fast food industry, keeping the prime cost—which includes both food and labor—below 55% of revenue is crucial for maintaining optimal financial health.

This benchmark allows restaurants to cover other essential expenses such as rent, utilities, and marketing while still achieving a reasonable profit margin. If the prime cost exceeds this percentage, it can squeeze profits and make it difficult to sustain the business in the long run.

However, this 55% guideline can vary depending on factors like location, menu pricing, and the efficiency of operations.

For instance, a fast food restaurant in a high-rent area might need to keep its prime costs even lower to compensate for higher fixed expenses. Conversely, a restaurant with a unique menu or strong brand might afford slightly higher prime costs due to its ability to charge premium prices and attract more customers.

Equipment maintenance should be budgeted at 1-1.5% of revenue due to high usage rates

In a fast food restaurant, budgeting 1-1.5% of revenue for equipment maintenance is crucial due to the high usage rates of kitchen appliances.

These establishments rely heavily on equipment like fryers, grills, and refrigerators, which are used constantly throughout the day. This frequent use leads to wear and tear, necessitating regular maintenance to ensure everything runs smoothly.

Without proper maintenance, equipment failures can lead to costly downtime and lost revenue, making it essential to allocate a portion of the budget for upkeep.

However, the exact percentage can vary depending on factors such as the age of the equipment and the volume of business. Restaurants with newer equipment or lower customer traffic might find that they can budget slightly less, while those with older equipment or higher foot traffic may need to allocate more to keep everything in top shape.

Inventory turnover should occur every 5-7 days to ensure freshness and reduce waste

In a fast food restaurant, inventory turnover every 5-7 days is crucial to maintain freshness and minimize waste.

Fast food items often contain perishable ingredients like vegetables, meats, and dairy, which can spoil quickly if not used in time. By ensuring a rapid turnover, restaurants can provide high-quality meals that meet customer expectations.

Additionally, frequent inventory turnover helps in reducing storage costs and prevents overstocking, which can lead to spoilage.

However, the ideal turnover rate can vary depending on factors such as menu complexity and customer demand. For instance, a restaurant with a limited menu might achieve faster turnover, while one with a more extensive menu may require a slightly longer cycle to manage diverse ingredients effectively.

Marketing expenses should be 2-4% of revenue, focusing on local promotions and digital outreach

Fast food restaurants often allocate 2-4% of their revenue to marketing because this range is generally sufficient to maintain visibility and attract customers without overspending.

Focusing on local promotions helps these restaurants tap into their immediate community, which is crucial for building a loyal customer base. Additionally, digital outreach is cost-effective and allows for targeted advertising, reaching potential customers who are most likely to visit.

However, this percentage can vary depending on factors like the restaurant's location, competition, and growth stage.

For instance, a new restaurant in a competitive area might need to spend more initially to establish its brand. Conversely, an established restaurant with a strong local presence might spend less, focusing instead on maintaining customer loyalty.

Profit margins typically range from 6-9%, higher than full-service restaurants due to lower labor costs

Fast food restaurants often enjoy profit margins between 6-9% because they have lower labor costs compared to full-service restaurants.

In a fast food setting, the service model is streamlined, requiring fewer staff members to operate efficiently. This efficiency reduces the overall labor expenses, which is a significant cost factor in the restaurant industry.

Additionally, fast food establishments typically have simplified menus that allow for quicker preparation and service, further reducing the need for a large workforce.

However, these profit margins can vary based on factors such as location, brand reputation, and operational efficiency. For instance, a fast food restaurant in a high-rent urban area might face higher costs, potentially lowering its profit margin, while a well-managed franchise in a suburban area could achieve margins at the higher end of the spectrum.

Real estate costs should not exceed 8% of total revenue to maintain financial stability

In the fast food industry, keeping real estate costs under 8% of total revenue is crucial for maintaining financial stability.

High real estate expenses can eat into profits, making it difficult to cover other essential costs like labor and ingredients. By keeping these costs low, a restaurant can ensure it has enough funds to invest in quality improvements and marketing efforts.

However, this percentage can vary depending on the location and size of the restaurant.

For instance, a restaurant in a prime urban area might face higher real estate costs, but it could offset this with increased foot traffic and sales. Conversely, a location in a less populated area might have lower real estate costs but also lower revenue, requiring a different financial strategy.

Seasonal promotions can increase foot traffic by up to 15%, especially during holidays

Seasonal promotions can boost foot traffic by up to 15% in fast food restaurants, particularly during holidays, because they tap into the festive spirit and create a sense of urgency.

During holidays, people are more likely to indulge in dining out, and a well-timed promotion can make your restaurant the go-to choice. These promotions often include limited-time offers or themed menu items, which can attract both regular customers and new visitors looking for something special.

However, the effectiveness of these promotions can vary depending on factors like location, competition, and the specific holiday being celebrated.

For instance, a fast food restaurant in a busy shopping district might see a larger increase in foot traffic during Christmas due to increased shopping activity. On the other hand, a restaurant in a residential area might benefit more from promotions during local events or school holidays, as families look for convenient dining options.

Effective upselling can increase average ticket size by 15-25%

Effective upselling can boost the average ticket size in a fast food restaurant by 15-25% because it encourages customers to purchase additional items or upgrade their existing choices.

When a customer is already committed to buying, suggesting a complementary item like a drink or dessert can be an easy sell. Additionally, offering an upgrade to a larger size or a combo meal can provide more value to the customer while increasing the total sale.

However, the success of upselling can vary depending on factors like the customer's mood and the skill of the staff in making the suggestion.

For instance, a well-trained employee who can read the customer's cues and offer a personalized suggestion is more likely to succeed. On the other hand, if the upsell feels forced or insincere, it might not work as effectively, and could even deter future purchases.

A fast food restaurant should aim for a break-even point within 12 months due to lower initial investment

A fast food restaurant should aim to reach its break-even point within 12 months primarily because of the lower initial investment required compared to other types of restaurants.

Fast food establishments typically have simpler menus and require less expensive equipment, which reduces the upfront costs. This means that they can start generating profits sooner if they manage their operational costs effectively.

However, the time to break-even can vary depending on factors such as location and market competition.

For instance, a fast food restaurant in a high-traffic area might reach its break-even point faster due to higher customer volume. Conversely, a location with fierce competition or in a less populated area might take longer to achieve profitability.

Health inspection scores should consistently be above 95% to avoid negative publicity and fines

Maintaining health inspection scores consistently above 95% is crucial for fast food restaurants to avoid negative publicity and fines.

High scores reflect a commitment to food safety and hygiene, which are essential for protecting customers from foodborne illnesses. When scores dip below this threshold, it can lead to public distrust and damage the restaurant's reputation, potentially resulting in a loss of business.

Moreover, failing to meet health standards can result in financial penalties and increased scrutiny from health authorities.

However, the importance of maintaining high scores can vary depending on the restaurant's location and customer base. In areas with stricter regulations or more health-conscious consumers, the impact of a low score can be even more significant, making it imperative for restaurants to prioritize cleanliness and compliance.

Drive-thru lanes should be designed to accommodate at least 10 cars to prevent bottlenecks

Drive-thru lanes should be designed to accommodate at least 10 cars to prevent bottlenecks because this capacity helps manage peak times efficiently.

During busy hours, such as lunch and dinner, a fast food restaurant can experience a high influx of customers, leading to long lines. If the drive-thru lane is too short, it can cause traffic congestion both within the restaurant's premises and on nearby roads.

By allowing space for at least 10 cars, the restaurant can ensure a smoother flow of vehicles, reducing wait times and improving customer satisfaction.

However, the ideal drive-thru capacity can vary based on factors like the restaurant's location and customer base. For instance, a restaurant in a high-traffic urban area might need a longer drive-thru lane compared to one in a less busy suburban location.

Implementing a loyalty program can increase repeat visits by 20-30%

Implementing a loyalty program in a fast food restaurant can boost repeat visits by 20-30% because it creates a sense of value and appreciation for customers.

When customers feel rewarded for their purchases, they are more likely to return to earn more points or rewards. This sense of earning something extra can make them choose your restaurant over competitors, especially if the rewards are enticing, like free meals or discounts.

However, the effectiveness of a loyalty program can vary depending on factors such as the program's design and the target audience.

For instance, a program that offers immediate rewards might be more appealing to younger customers who prefer instant gratification. On the other hand, a program that accumulates points over time might attract frequent diners who enjoy building up to a larger reward, thus increasing their loyalty and repeat visits.

Menu simplification can reduce kitchen errors and speed up service, boosting customer satisfaction

Menu simplification in a fast food restaurant can significantly reduce kitchen errors and speed up service, ultimately boosting customer satisfaction.

By having a streamlined menu, kitchen staff can focus on mastering a smaller set of dishes, which reduces the likelihood of mistakes. This also means that training new employees becomes easier and faster, as they have fewer items to learn.

Additionally, a simplified menu allows for faster order preparation, as staff can work more efficiently without juggling a wide variety of ingredients and cooking methods.

However, the impact of menu simplification can vary depending on the restaurant's target audience and location. For instance, a restaurant in a diverse area might need to maintain a broader menu to cater to different tastes, while a location with a more homogeneous customer base might benefit more from a simplified menu.

Investing in energy-efficient equipment can reduce utility costs by 10-15% annually

Investing in energy-efficient equipment can significantly reduce utility costs for a fast food restaurant by 10-15% annually because these appliances use less energy to perform the same tasks.

For instance, energy-efficient fryers and grills heat up faster and maintain temperatures more consistently, which means they consume less electricity or gas. Additionally, LED lighting and efficient HVAC systems can further cut down on energy usage, contributing to overall savings.

However, the actual savings can vary depending on factors like the size of the restaurant and the specific equipment being replaced.

In a larger establishment, the impact of upgrading to energy-efficient equipment might be more pronounced due to the higher baseline energy consumption. Conversely, smaller restaurants might see a smaller percentage reduction, but the cost savings can still be significant in the long run.

Regularly updating menu boards and signage can increase sales by 5-10% by highlighting new or popular items.

Regularly updating menu boards and signage in a fast food restaurant can boost sales by 5-10% because it effectively draws attention to new or popular items.

When customers see fresh and appealing visuals, they are more likely to be intrigued and make impulse purchases. This is especially true when the signage highlights limited-time offers or seasonal specials, creating a sense of urgency.

Moreover, updated signage can help in keeping the menu exciting and relevant, which can enhance the overall dining experience.

However, the impact of updated signage can vary depending on factors like location and customer demographics. In areas with a high foot traffic of younger customers, for instance, visually appealing and frequently changing signage might have a more significant effect compared to locations with a more traditional customer base.