Current Events > Is 10-14% net profit margin decent for a sushi restaurant?

(+) Yeah! (+)

Considering revenue for the month is around $21k, and cost of goods sold is about $8k. Operating expenses account for a fixed rate of $11,000, leaving a net profit of usually 2-3k a month.

My friend works 6 days out of the week, 10 hours a day at his restaurant. I just found out today, they were pricing their menu based on cost of goods sold and never factored in operating expenses. Basically a $40 crunchy roll platter with 40 pieces of sushi, only profits them $5 ish. That means on a good day, they makes around $100 for 10 hours of work. It's saddening because their business model is based on "Japanese" business knowledge where they naively thought running a business in the US is similar to Japan. It's not. In Japan you can get away with selling for cheap because there's not much operating cost to worry about.

Should they raise the price of their crunchy roll platter to at least $50? How would they explain to their customers the sudden $10 price increase? I know CE has some super smart financial consultants/accountants. Will you be so kind to suggest anything that would help? These are good people and I hate to see them on the losing side.

I thought most restaurants did like less than 5% profit margins

Whats their ebit

Google says

The range for restaurant profit margins typically spans anywhere from 0 15 percent, but the average restaurant profit margin usually falls between 3 5 percent.

Are you accounting for taxes in your numbers?

Naysaspace posted...

Whats their ebit

No debt other than a 50K notes payable to friend that lent them money.

No. 10-14% is terrible unless they are selling a lot of alcohol I wouldnt think that the place would fen be able to stay in business with those margins

if I was running a place serving food I would want my profit margin to be comfortably in the the 25-30% range

[LFAQs-redacted-quote]

No alcohol as it's take out only. Apparently for a dine in restaurant, they need to have a "bathroom" that's accessible to customers by law.

10-15% is around the average for a sushi restaurant in the states.

[LFAQs-redacted-quote]

So let's say their sushi sells for $16 a pop. If they want to net at least 30%, wouldn't they have to raise the price of their sushi to at least $18-20? How will they be able to suddenly increase the price of their sushi without deterring customers?

TodorokiHayato posted...

Considering revenue for the month is around $21k, and cost of goods sold is about $8k. Operating expenses account for a fixed rate of $11,000, leaving a net profit of usually 2-3k a month.

My friend works 6 days out of the week, 10 hours a day at his restaurant. I just found out today, they were pricing their menu based on cost of goods sold and never factored in operating expenses. Basically a $40 crunchy roll platter with 40 pieces of sushi, only profits them $5 ish. That means on a good day, they makes around $100 for 10 hours of work. It's saddening because their business model is based on "Japanese" business knowledge where they naively thought running a business in the US is similar to Japan. It's not. In Japan you can get away with selling for cheap because there's not much operating cost to worry about.

Should they raise the price of their crunchy roll platter to at least $50? How would they explain to their customers the sudden $10 price increase? I know CE has some super smart financial consultants/accountants. Will you be so kind to suggest anything that would help? These are good people and I hate to see them on the losing side.

it depends on how much energy,machinery,rent, labor cost its operating on. Also what state, that change what you need to keep the business alive . 10-15 %is way better than most restaurant. Most failing restaurants cant make money, let alone get it up to 14%.

source : used to run a pizza business that was struggling to get 5% profit margin. Who would have probably stay in business if it even cost to that number.

superbot400 posted...

it depends on how much energy,machinery,rent, labor cost its operating on. Also what state, that change what you need to keep the business alive . 10-15 %is way better than most restaurant. Most failing restaurants cant make money, let alone get it up to 14%.

source : used to run a pizza business that was struggling to get 5% profit margin. Who would have probably stay in business if it even cost to that number.

Their operating expense ratio is about 52% on average. They operate in California (I have no idea why they would consider doing business in such an expensive state).

May I ask why you were struggling to get 5% margin? I thought the cost of goods sold for pizza would be relatively low. Did you have to pay interest on your business debt or were your operating costs also similar to 50%?

emblem-man posted...

Google says

Are you accounting for taxes in your numbers?

net earnings is after taxes. ebit is before taxes and interest

I'm not a restaurant owner or anything so don't take me too seriously. This is just putting serious thought into the subject at hand.

If you have a 100 customers paying for 40 dollar crunchy roll platters, and you lose 20% of customers but the rest (80) pay up 50. It's 4000 vs 4000. So basically provided you don't lose more than 20% of your customers you should be fine.

If the restaurant has a more intimate setting where the owner knows the customers just lay it out for people honestly. They'll either continue patronizing the place out of supporting a local place or not. Customers always should have a say. You can either just throw the price in without them knowing or not. However it's possible that you lose out on tips too. If people know you're charging more to make a more comfortable living then tipping shouldn't be necessary if everyone is getting paid well.

REGARDLESS, I'll have to say a 40 piece sushi set for 40 sounds like a steal.

https://gamefaqs.gamespot.com/a/forum/f/f66b2950.png
This is one I ripped from a place. Not sure but 30 pieces commands a price of 46 dollars. But your quality of sushi will have to determine the price ultimately and if it's good enough.

If you're struggling for prices, there are probably higher yielding dishes like spicy varieties of fish where you can mix in lower quality fish with spicy mayo and still charge higher prices because people tend to enjoy them regardless. (I enjoy eating these a lot).

If the place is new it seems pretty easy to change the price on stuff and have a short explanation stating it wouldn't be profitable and you'd have to shutter. Please understand, and move on. No point in running a restaurant to feed people and then close down and be unable to feed those people because you didn't make enough money. So long as you aren't being unethical about your pricing and how food is prepared your friends should be fine.

badjay posted...

I'm not a restaurant owner or anything so don't take me too seriously. This is just putting serious thought into the subject at hand.

If you have a 100 customers paying for 40 dollar crunchy roll platters, and you lose 20% of customers but the rest (80) pay up 50. It's 4000 vs 4000. So basically provided you don't lose more than 20% of your customers you should be fine.

If the restaurant has a more intimate setting where the owner knows the customers just lay it out for people honestly. They'll either continue patronizing the place out of supporting a local place or not. Customers always should have a say. You can either just throw the price in without them knowing or not. However it's possible that you lose out on tips too. If people know you're charging more to make a more comfortable living then tipping shouldn't be necessary if everyone is getting paid well.

REGARDLESS, I'll have to say a 40 piece sushi set for 40 sounds like a steal.

https://gamefaqs.gamespot.com/a/forum/f/f66b2950.png
This is one I ripped from a place. Not sure but 30 pieces commands a price of 46 dollars. But your quality of sushi will have to determine the price ultimately and if it's good enough.

If you're struggling for prices, there are probably higher yielding dishes like spicy varieties of fish where you can mix in lower quality fish with spicy mayo and still charge higher prices because people tend to enjoy them regardless. (I enjoy eating these a lot).

If the place is new it seems pretty easy to change the price on stuff and have a short explanation stating it wouldn't be profitable and you'd have to shutter. Please understand, and move on. No point in running a restaurant to feed people and then close down and be unable to feed those people because you didn't make enough money. So long as you aren't being unethical about your pricing and how food is prepared your friends should be fine.

Thank you for taking your time with this. I appreciate your help mate. I just spoke to my friend and they're concerned about ruining the established relationship they have with their customers.They're telling me customers often come to their establishment through word of mouth and raising the price of their menu would deter their loyal customer base. I told them them the same thing you just mentioned, "If 80% of your customers are willing to pay, why not?"

Ultimately, it's their conservative Japanese- non capitalistic viewpoint that's ruining their business model. Apparently, these guys are happy working 10 hours a day for peanuts. I would never understand my friend and their work ethics of "diminishing returns."

TodorokiHayato posted...

I just spoke to my friend and they're concerned about ruining the established relationship they have with their customers.

This is why you talk to them. If people want to see a place die off slowly that they love because they really want to pay cheaper prices then by all means its their choice to say they don't want to pay higher prices. Same thing for the owner, if they want to see their restaurant die off very slowly or struggle to make ends meet to the point that they have to cut corners on quality or sanitation or some sort then they're just as free to do that. But you don't have to burn yourself to keep your customers warm. Ultimately a customer should be happy about their restaurant being open and prosperous, and the owner should be happy to be making a living doing something they're proud of. If they're proud in serving high quality sushi that they pay a bit extra to buy the fish to source it for then by all means charge what you must to keep that going. But don't compromise on that while also cutting prices. Nobody wins in the end, you're not happy with using lower quality fish, your customers aren't happy eating lower quality sushi. That beloved restaurant will close off because they don't make enough money that customers could've been happy to pay up for.

I've always wanted to open up a bakery where I just make up my own unique baked goods that I experiment on. Those would be at par pricing or probably a bit more just to make a living while I'd have the standard 4 carrying baked goods that most people would generally buy out. But I wouldn't hesitate to shutter if I didn't make enough money or people hesitated on pricing. I would never want to compromise on my quality, and I would be upfront about things. Price of sugar gone up? Here's where we source our sugar and why the price has gone up 10 cents etc. I know a lot of places wouldn't be run like that, but it's how I would want to do it. I always want people to be as informed as possible and not wonder why this thing is more expensive and this is cheaper even though they're relatively the same in their heads. I want people to know I'm making a comfortable living, and because of my comfortable conditions I'm very happy and proud to deliver a higher quality of baked goods as a result of that, I want them to know I'm making my best for them and because it's my best here's the price I feel like I should earn to do so while not also bankrupting people.

But a man can dream lol.