Data provided here comes from our team of experts who have been working on business plan for a steakhouse restaurant. Furthermore, an industry specialist has reviewed and approved the final article.
Are steakhouse restaurants profitable, and what is the typical monthly income for upscale steak restaurants?Let's check together.
Revenue metrics of a steakhouse restaurant
How does a steakhouse restaurant makes money?
A steakhouse makes money by selling steaks and other meals to customers.
What are the common products sold in steakhouse restaurants?
Steakhouse restaurants typically offer a variety of delicious and hearty dishes centered around high-quality cuts of meat, particularly beef.
The core offerings usually include a selection of different steak cuts, such as ribeye, filet mignon, New York strip, and sirloin, cooked to customers' preferred levels of doneness, from rare to well-done. These steaks are often seasoned and grilled to perfection, showcasing their rich flavors and tenderness.
Alongside the steaks, steakhouse menus commonly feature a range of side dishes and accompaniments, like baked potatoes, mashed potatoes, creamed spinach, grilled vegetables, and crisp salads.
Many steakhouse establishments also provide various sauce options, including classics like mushroom sauce, peppercorn sauce, and béarnaise sauce, allowing diners to customize their steak experience.
Some steakhouse restaurants might also incorporate other meats, such as lamb chops, pork chops, or chicken, to cater to different preferences.
What about the prices?
At a typical steakhouse restaurant, prices can vary based on the type of steak and its cut, as well as additional factors such as portion size and accompaniments.
Generally, the prices for steaks can range from around $20 to $60 or more per steak, with popular cuts like sirloin, ribeye, and filet mignon falling within this range. Premium cuts like Wagyu or dry-aged steaks can be on the higher end of the spectrum, sometimes reaching $100 or more.
Steakhouse menus often offer a variety of side dishes, which can include options like mashed potatoes, sautéed vegetables, or loaded baked potatoes, typically priced between $5 and $15.
Appetizers like shrimp cocktails or calamari might range from $10 to $20, while desserts such as cheesecake or chocolate cake might cost around $8 to $12.
| Item | Price Range ($) |
|---|---|
| Steaks | $20 - $100+ |
| Side Dishes | $5 - $15 |
| Appetizers | $10 - $20 |
| Desserts | $8 - $12 |
Who are the customers of a steakhouse restaurant?
A steakhouse restaurant typically serves a variety of customers, ranging from casual diners to special occasion celebrators.
Which segments?
We've made many business plans for projects like this. These are the groups of customers we usually see.
| Customer Segment | Description | Preferences | How to Find Them |
|---|---|---|---|
| Business Professionals | Busy individuals looking for upscale dining experiences | Prime cuts, efficient service, private dining options | Partner with local businesses, advertise near corporate areas |
| Celebration Seekers | People celebrating special occasions like birthdays or anniversaries | Group-friendly seating, special occasion packages, desserts | Offer celebration packages, collaborate with event planners |
| Tourists | Visitors exploring the area and looking for local dining experiences | Local specialties, ambiance, convenient location | Partner with hotels, promote on travel websites |
| Health-Conscious Diners | Customers seeking lean and protein-rich meal options | Lean cuts, salad options, grilled vegetables | Highlight nutritional information, collaborate with fitness centers |
| Food Enthusiasts | Passionate about culinary experiences and trying new dishes | Unique cuts, chef's specials, tasting menus | Showcase chef's expertise on social media, food blogs |
How much they spend?
In our detailed analysis of the business model, we've observed that customers usually spend between $50 to $100 per meal at a quality steakhouse restaurant. This range is inclusive of their starters, main course, desserts, and any beverages they might order.
Considering customer habits and preferences, data indicates that an average customer dines at the steakhouse between 2 to 4 times a month. This frequency is influenced by factors such as occasion, dining preferences, or the individual's dining out habits.
Given these factors, the estimated lifetime value of an average customer at the steakhouse can be calculated for a one-year period. Assuming customer retention throughout the year, the lifetime value would range from $1,200 (2x50x12) to $4,800 (4x100x12).
With a balanced view considering various factors and normalizing extremes, we can estimate that an average customer would contribute around $3,000 in revenue to the steakhouse annually.
(Disclaimer: the figures presented above are based on averages and hypothetical scenarios. They may not precisely reflect your specific business situation and are subject to fluctuate based on the economic environment, location, and management practices.)
Which type(s) of customer(s) to target?
It's something to have in mind when you're writing the business plan for your steakhouse restaurant.
The most profitable customers for a steakhouse restaurant tend to be "celebration diners" and "loyal regulars."
Celebration diners include groups celebrating special occasions like birthdays, anniversaries, or promotions, and they tend to spend more on upscale meals and drinks.
Loyal regulars are repeat customers who visit frequently and build a strong connection with the restaurant. They are profitable because they provide consistent revenue and often bring in friends and family.
To target and attract them, the restaurant can run special promotions for celebrations, offer loyalty programs, and engage with them on social media.
To retain them, maintaining high-quality food and service is crucial, along with personalized perks for loyal customers, such as discounts or exclusive events, to keep them coming back and recommending the restaurant to others.
What is the average revenue of a steakhouse restaurant?
The average monthly revenue for a steakhouse restaurant can range significantly, typically falling between $10,000 and $100,000. This range can be further explained by analyzing different types of steakhouses, from a small family-owned establishment to a high-end, luxury steakhouse.
You can also estimate potential revenue for your own steakhouse, using various assumptions, with a comprehensive financial plan tailored for restaurant businesses.
Case 1: A quaint, family-owned steakhouse in a small town
Average monthly revenue: $10,000
This type of steakhouse operates on a small scale, possibly situated in a rural area or a small town, with a steady stream of local regulars. It's likely more affordable, offering a limited selection of steaks and side dishes without any high-end, premium options.
Such establishments usually do not have extensive seating, catering to maybe no more than 50 customers per day. Additionally, these steakhouses might not offer full bar services or only have a very limited selection of wines and spirits.
Assuming an average expenditure of $20 per customer and around 500 customers per month, the revenue for this type of steakhouse would be approximately $10,000 monthly.
Case 2: A mid-range steakhouse in an urban setting
Average monthly revenue: $50,000
This kind of steakhouse is commonly found in busier urban areas, drawing both locals and tourists. It offers a more extensive selection of cuts and a moderate wine list, set in a more upscale environment compared to family-owned establishments. Such a steakhouse might also provide additional services such as event hosting, a full-service bar, or live entertainment.
With a larger seating capacity, this steakhouse could serve around 200 customers per day. Given the diverse offerings and quality, customers might spend an average of $50 each visit.
Attracting about 1,000 customers per month, a steakhouse like this would have a potential average revenue of $50,000 per month.
Case 3: A high-end, luxury steakhouse with premium offerings
Average monthly revenue: $100,000
This category represents the upper echelon of steakhouses, often situated in prime city locations, perhaps even with a view. Not only does it offer a gourmet menu featuring premium cuts and a wide selection of aged steaks, but it also boasts an extensive wine and spirits collection, possibly including rare finds.
Such luxury establishments are about the entire experience, not just the meal, offering top-notch service, elegant interior decor, and sometimes additional perks like valet parking or private dining options.
Customers at this kind of establishment are paying for premium quality and exclusivity, potentially spending upwards of $100 per visit. With the capacity to serve around 1,000 customers per month, such a steakhouse could easily generate $100,000 in revenue monthly.
These scenarios demonstrate the potential variability in revenue among steakhouses, emphasizing the influence of factors such as location, target demographic, and the overall dining experience provided.
The profitability metrics of a steakhouse restaurant
What are the expenses of a steakhouse restaurant?
Expenses for a steakhouse restaurant include premium meat ingredients, kitchen equipment, rent or lease payments for the restaurant, staff wages, and marketing.
| Category | Examples of Expenses | Average Monthly Cost (Range in $) | Tips to Reduce Expenses |
|---|---|---|---|
| Food Costs | Meat, seafood, vegetables, spices, sauces | $10,000 - $15,000 | Source ingredients locally, reduce food waste, negotiate with suppliers |
| Labor Costs | Salary, wages, benefits, payroll taxes | $15,000 - $25,000 | Optimize staffing, cross-train employees, use scheduling software |
| Rent and Lease | Restaurant space, kitchen equipment | $5,000 - $10,000 | Negotiate lease terms, consider shared spaces, maintain equipment |
| Utilities | Electricity, water, gas, trash removal | $2,000 - $4,000 | Invest in energy-efficient appliances, monitor usage, negotiate rates |
| Marketing and Advertising | Advertising campaigns, promotions, social media | $1,000 - $3,000 | Focus on digital marketing, use social media effectively, track ROI |
| Insurance | Property, liability, workers' compensation | $500 - $1,000 | Shop around for insurance, assess coverage needs |
| Repairs and Maintenance | Equipment repairs, facility upkeep | $1,500 - $3,000 | Maintain equipment regularly, plan for preventive maintenance |
| Licenses and Permits | Business licenses, health permits | $500 - $1,000 | Stay compliant with regulations, renew licenses on time |
| Interest and Loan Payments | Loan interest, financing costs | $1,000 - $2,500 | Consider refinancing, pay down high-interest loans |
| Contingency and Miscellaneous | Unforeseen expenses, miscellaneous costs | $1,000 - $2,000 | Build an emergency fund, budget for unexpected expenses |
When is a a steakhouse restaurant profitable?
The breakevenpoint
A steakhouse becomes profitable when its total revenue exceeds its total fixed and variable costs.
In simpler terms, it starts making a profit when the money it earns from selling meals, beverages, and possibly catering services becomes greater than the expenses it incurs for rent, ingredients, salaries, kitchen equipment, and other operating costs.
This means that the steakhouse has reached a point where it not only covers all its expenses but starts generating income; we call this the breakeven point.
Consider an example of a steakhouse where the monthly fixed costs typically amount to approximately $30,000.
A rough estimate for the breakeven point of a steakhouse, would then be around $30,000 (since it's the total fixed cost to cover), or selling between 1000 and 1500 steak meals a month, assuming the average price per meal (including beverages) ranges from $20 to $30.
It's important to understand that this indicator can vary widely depending on factors such as location, size, menu prices, operational costs, and competition. A high-end steakhouse would obviously have a higher breakeven point than a smaller establishment that doesn't require as much revenue to cover their expenses.
Curious about the profitability of your steakhouse? Try out our user-friendly financial plan crafted for steak restaurants. Simply input your own assumptions, and it will help you calculate the amount you need to earn in order to run a profitable business.
Biggest threats to profitability
The biggest threats to profitability for a steakhouse restaurant can include fluctuating food costs, which can increase due to changes in the price of beef and other ingredients, potentially squeezing profit margins.
Competition from other restaurants in the area can also be a significant threat, as it can lead to price wars or decreased customer traffic.
Additionally, shifts in consumer preferences towards healthier or vegetarian options might reduce demand for steak, impacting sales.
Rising operating costs, such as rent, labor, and utilities, can further erode profits if not managed efficiently.
Poor customer service or quality control can result in negative reviews and loss of repeat business, while health and safety violations can lead to fines and reputational damage.
These threats are often included in the SWOT analysis for a steakhouse restaurant.
What are the margins of a steakhouse restaurant?
Gross margins and net margins are crucial financial metrics used to determine the profitability of a steakhouse restaurant business.
The gross margin is the difference between the revenue earned from selling food and beverages and the direct costs of producing those sales, including purchasing raw materials (like steaks and other ingredients), kitchen staff salaries, and restaurant utilities directly involved in food preparation.
Essentially, it represents the profit remaining after deducting costs directly related to the restaurant services, such as food supplies, kitchen staff wages, and specific utility bills related to food preparation.
Net margin, however, incorporates all expenses the restaurant faces, including indirect costs like administrative expenses, marketing, rent, and taxes, providing a more comprehensive insight into the steakhouse's overall financial health.
Gross margins
Steakhouses generally have an average gross margin in the range of 60% to 70%.
For instance, if your steakhouse earns $20,000 per month, your gross profit calculation might be roughly 65% x $20,000 = $13,000.
To illustrate with an example:
Consider a steakhouse that serves 500 customers in a month, with each customer spending on average $40. The total revenue for that month would be $20,000.
The restaurant experiences costs including purchasing steaks, vegetables, spices, and paying kitchen staff. If these costs amount to $7,000, the steakhouse's gross profit would be $20,000 - $7,000 = $13,000.
Therefore, the gross margin for the steakhouse would be $13,000 / $20,000 = 65%.
Net margins
Steakhouses usually have an average net margin in the range of 5% to 15%.
In simpler terms, if your steakhouse has revenues of $20,000 per month, your net profit might be approximately $2,000, representing 10% of the total revenue.
We use the same example for consistency.
Our steakhouse, with revenue of $20,000, incurs direct costs of $7,000.
On top of these direct costs, the steakhouse also has other expenses, including administrative costs, marketing, rent, insurance, and taxes. Assuming these additional expenses amount to $11,000, the total expenses are $7,000 + $11,000 = $18,000. So, the steakhouse's net profit would be $20,000 - $18,000 = $2,000.
In this scenario, the net margin for the steakhouse would be $2,000 / $20,000 = 10%.
For restaurant owners, understanding the net margin (in contrast to the gross margin) is pivotal as it offers a clearer vision of the actual earnings of your steakhouse after accounting for all operational costs and expenses involved.
So, what might your profits look like as a steakhouse restaurant owner?
Grasping the importance of net margin is essential for any restaurant owner, as it reveals the profitability of your establishment after all expenses have been covered. Essentially, it indicates what portion of your earnings is actually profit.
The amount you earn can vary significantly based on several factors, including your management skills, investment into the business, customer service quality, and even the location of your steakhouse.
Struggling Steakhouse Owner
Earns $1,500 per month
If you're not fully invested in the venture, your steakhouse might suffer from subpar service, average or inconsistent meal quality, and inadequate marketing. Let's say your total revenue is only $10,000 in this scenario.
If your management of operational costs isn't efficient, achieving a net margin higher than 15% can be challenging.
Under these conditions, your monthly profit would hover around $1,500 (15% of $10,000), placing you in a precarious position in the competitive restaurant industry.
Average Steakhouse Owner
Earns $7,500 per month
If you're running a decent establishment with good food, pleasant ambiance, and satisfactory customer service, you might generate about $40,000 in revenue. You pay attention to customer feedback, engage in some promotional activities, and have a variety of menu offerings, though perhaps not with a unique selling proposition.
You keep a watchful eye on expenses, potentially achieving a net margin of around 25% with smart management and moderate innovation in your services.
This would bring your monthly earnings to approximately $10,000 (25% of $40,000), marking you as a stable, average performer in the market.
Exceptional Steakhouse Owner
Earns $50,000 per month
As a highly committed and innovative owner, you leave no stone unturned. Your steakhouse boasts an exceptional menu, a renowned chef, an extraordinary dining experience, and stellar customer reviews. You engage in effective marketing strategies and perhaps your restaurant is strategically located, drawing high-end customers, possibly bringing in a total revenue of $200,000.
You've mastered the art of cost management, sourcing the best quality ingredients at favorable prices, optimizing staff costs, and controlling overheads, which sees your net margin soaring at about 40%.
This scenario would see you reaping a substantial $80,000 per month (40% of $200,000), placing you at the pinnacle of the steakhouse domain, reaping the rewards of your dedication and strategic acumen.
Aspiring to these heights begins with a comprehensive, well-thought-out business plan for your steakhouse, a relentless pursuit of excellence, and a responsive approach to the market's dynamics and your customers' ever-evolving preferences.