No matter where you are in the world, the restaurant business always tends to be booming.
There's a range of cuisines in this sector, and no two restaurants are identical. Therefore this variation in the restaurant industry can make it appealing for people to establish a business. And restaurant owner salary packages can be very attractive!
But, before opening a restaurant and being a success, it's important to answer two questions: What is the restaurant owner's role? and How much does a restaurant owner make?
What do restaurant owners do?
If you're planning on being a restaurant owner, it's important to take responsibility and delegate certain tasks to your employees. There's a variety of responsibilities the average restaurant owner has to deal with daily, weekly, monthly, and yearly.
- Set goals for the day: At the beginning of each day, you should set measurable goals for you and your team to achieve.
- Inform staff of daily specials: If you have any specials for that day, it's important that your staff are briefed and knowledgeable about them to inform the customers.
- Review the menu: Check the items on the menu to see if everything is in stock and, if not, which ones aren't, so staff can act quickly if a customer orders.
- Answer correspondence: Take some time answering any queries sent via email, social media, and follow-up on reviews.
- Deliveries: Order and organize any incoming deliveries.
- Inspect equipment: Have a look around your restaurant to see if any equipment is faulty; if so, call the technician for maintenance.
- Check the bathrooms: Check the bathrooms to see if they're fully stocked for your customers.
- Staff rotas: Check the staff schedule for the day and the following day. Also, review clock-in and clock-out times.
- Inventory: Review the inventory to check if the kitchen and the bar are fully stocked.
- Health inspection: Hold unannounced health inspections to train your team on what health inspectors are looking for.
- Look at the budget and financials: Figure out why your finances are up or down on the previous month and make adjustments.
- Check-in: Hold one-on-one meetings with your staff to see how they're doing in the workplace.
- Look at your projections: Take a step back and review your forecasts to see if they are close to your business plan or business model.
What factors determine a restaurant owner's salary?
You might be wondering how much do restaurant owners make? Well, a few factors can affect a typical restaurant owner's salary. Typically, they can be split into operational costs and sales.
Costs to run the restaurant
Before you can pocket any money, you have to have enough allocated for running the restaurant. For example, you need to have enough money to cover the outgoing operational costs such as the following:
- POS system
- Food costs
- Real estate
The total profit of the restaurant
Whatever profits are made once you deduct all expenses and payroll will influence how much money you take home. However, based on the sales and net income you make, you should, on average, be taking less than 50% so you can reinvest the rest into the restaurant, to make more money later.
Sometimes your customer numbers can stay steady, surge, or dramatically decrease based on the season you're operating in. For example, if you are open during a seasonal holiday like Thanksgiving or Christmas, your sales could decline a lot due to customers opting to spend the season with family. On the contrary, you might experience a boost in your sales during a popular time people choose to dine out with friends and family like New Year's Eve.
Other seasonal holidays that could influence your profits are:
- Public holidays
- New Year's Day
- Religious holidays
The weather that day, week, or month can influence how much food or drink the average restaurant sells. Most of the time, the restaurant industry tends to do incredibly well in the summer months. Similarly, in colder climates, your restaurant could attract more customers due to the warmth it provides. Thus, increasing your salary.
First-year costs vs. other years
If your restaurant is new and operating in the first year, you may have a lower salary due to specific overhead costs to run your restaurant. For example, you might have higher rent, equipment costs, and insurance for the first year of running your business. As a result, you could have less profit and therefore might have to take a lower salary to survive until you're established.
The success of the average restaurant can often heavily depend on where it's located. If a restaurant is in a busy area, it's more likely to attract customers, gain popularity and generate more sales. As a result, you can earn more through your restaurant ownership. Ideally, restaurants that have the following can earn slightly more:
- Situated in the city center
- Next to a school or college
- Inside a shopping mall
- Accessible via public transport
How much do restaurant owners typically make?
Arguably, there's no specific figure that restaurant owners can make; their earnings can be based on a range of variables mentioned above. However, there can be a price bracket where their earnings fall into place.
What is the average income for a restaurant owner?
Typically in the USA, restaurant owners can make anything from $24,000-$155,000 a year. Here are some statistics to show how we came to this price range:
- Payscale: As per Payscale, the salary ranges between $30,000-$148,000. Moreover, bonuses can range between $1,000-$49,000. The national average salary is $73,571.
- Economic Research Institute (ERI): According to the ERI, the typical salary is $32,494, and the hourly rate is $16 with an average yearly bonus of $812.
- Glassdoor: The range Glassdoor states is between $32,000 and $136,000 a year. They also note that the average base pay can be $66,141.
How much do restaurant owners make a month?
Restaurant owners' monthly salaries vary according to their skill level, location, and years of experience.
- Zip Recruiter: According to Zip Recruiter, the average yearly salary for a restaurant owner in the USA in November 2021 is $72,600. Therefore, their monthly salary is $6,050.
- Comparably: In some parts of the USA, Comparably states that the typical salary is $51,414 making monthly earnings $4,284.50.
How much should you really pay yourself as a restaurant owner?
The earnings of a restaurant manager aren't fixed and can vary every month or year based on the restaurant's sales. According to the IRS, you should pay yourself a salary paid to an owner of a similar business that offers the same services.
In the first few years of your establishment, you should pay yourself just enough money to live, which will help you reduce the overhead costs for your restaurant. Often, you will want to pay yourself less than 50% of the profits, based on the restaurant profit margins.
This will help you see how much funding the restaurant needs for investors, labor costs, stock, and more. Plus, it will allow you to generate larger net profits. Then, once your restaurant breaks even, you should calculate your salary based on the financial growth of the restaurant.
How profit margin and salary are related?
Profit margin is essential to the restaurant industry as it compares the restaurant profits compared to the sales. The percentage is calculated once the expenses have been deducted, and then the figure is divided by the total revenue. Then from there, restaurant owners' salaries can be calculated.
The restaurant business profit margin can span between 0-15%; however, the average profit margin ranges between 3-5%.
Business ownership type is also important – sole proprietorship vs LLC vs partnership
Salaries in a restaurant can vary based on the type of business owner. Regardless of the business ownership, though, it's always best to speak to an accountant to know you're following the guidelines.
- Sole Proprietorship – If you're in a sole proprietorship, you're your own boss and you can pay your earnings when you please. When your restaurant's profits are viewed the same as your income, you can pay tax similar to an employee. It's recommended if you're a Sole Proprietor to pay your salary regularly, so you can have a better idea of the operational costs of your restaurant and how much to keep for personal income.
- LLC – In accordance with the IRS, a single-member LLC is viewed as a sole proprietorship. Therefore, salary is based on filing the business's income and expenses based on your tax return. No business return is needed.
- Partnership – If you have business partners, you have to decide in advance between your team what salaries are fair to draw from the income pool.
Common Misconceptions that every restaurant owner should know
There are many myths many restaurant owners fall victim to when opening or running a restaurant.
It costs more to cook from scratch than use readymade ingredients
While maintaining food costs are essential to a restaurant, it only contributes to around 22%-35% of the restaurant costs. Most of the time, raw ingredients cost less than pre-packaged or pre-cooked food.
Plus, you will spend less on labor to open the packaging or boil the item.
Moreover, high-quality raw or cooked food can allow you to charge more and secure a higher profit.
Location is essential to your restaurant success
While location can help you bring in customers, it's not the major factor in determining a successful restaurant. Your success also depends on your food, customers, ambiance, and a range of other factors.
Experienced servers cut down on training costs
Even if you decide to hire a highly experienced team, they may not have the right attitude to match the personality you want to be portrayed in your restaurant.
Therefore you might have to train them to be approachable and likable. You should hire based on their personality, pace, intelligence, skills, and more.
Overall, owning a restaurant can be a challenging but rewarding business. Ultimately the salary of a restaurant manager can vary based on the season, operating costs, sales, investors, years of establishment, and more. However, the average salary for a restaurant owner in the USA is between $24,000- $150,000 a year.
1. How much do top restaurant owners make?
On average, in the USA, top restaurant owners make around $8,916 monthly and take home a yearly salary of $107,000.
2. Is there money in owning a restaurant?
Of course, restaurants are profitable, however, they have low profit margins. Their profit is based on their size, type of restaurant, and variables. Usually, it takes 2 years for an owner to make a profit.