Last modified on June 27th, 2022 at 1:51 pm
If you’ve ever dreamed about owning your own restaurant, you may be curious about how it all works. There is a lot more to running a restaurant than just having good food and a convenient location. It involves a lot of attention to detail and keeping up with a broad range of tasks, from marketing to finance to human resources.
So how much do you get paid to do all of this work as an entrepreneur? The answer is that it depends on factors like how busy your restaurant is, how much you’re selling, and your overhead costs. On average, restaurant owners in the United States make anywhere from $33,000 to $145,000 per year.
Even if you’re on the lower end of that scale, there is still tremendous potential for growth over time. One way to boost sales – and your earnings – is using cost-effective marketing strategies, such as custom branded disposable products. If you’re looking for high quality branded disposables, give Budget Branders a call to learn more about how we can partner with you to make your business a success.
What Do Restaurant Owners Make?
Before diving into the statistics, let’s talk about the obvious: no two restaurants are the same. Eric Ripert of Le Bernardin in New York City almost certainly earns more each year than the owner of a small family diner that offers simple, inexpensive dishes (especially because Ripert also has hosted TV shows and written cookbooks!). Similarly, a restaurant owner who is just starting out will probably make less each year than someone who has a popular, well-established restaurant.
There are two primary factors that go into the profitability of a restaurant – which has a direct impact on how much a restaurant owner makes. First, the cost of doing business is critical. If you have sky-high rents and expensive ingredients, it’ll affect your bottom line. By the same token, if you own your building and have relatively low ingredient costs, then you might actually out-earn a restaurant owner who runs a four star restaurant. Cutting ingredient costs doesn’t always mean sacrificing quality. You can shop around and try to strike deals with vendors to get quality ingredients at a lower price. It’s also possible that more expensive ingredients could result in higher profits if the ingredients drastically improve the quality of your food. Reducing costs is ultimately a balancing act between price and quality.
The second factor is how much product you are selling. If your restaurant is consistently busy, then that will influence how much money you are earning.
These two factors make up a restaurant’s profit margin, which is how restaurants express their profits. The formula to determine profits is simple: total sales – expenses = profit. To get your profit margin, divide your net profit by your total revenue, and then multiply the number by 100 to get a percentage. The higher your profit margin, the higher your salary will typically be.
So what is an average salary for a restaurant owner? According to Payscale, the average base salary for a restaurant owner in the United States is $73,257. The base salary range for restaurant owners in the U.S. is $33,000 to $145,000.
Restaurant owners may have higher salaries if they are paid a bonus or participate in profit sharing. A bonus may add $1,000 to $50,000 annually to earnings, while profit sharing can range from $1,000 to $247,000. This brings total average earnings to $26,000 to $166,000 annually.
Average Restaurant Owner Salaries By State
Interested in knowing how much you could make as a restaurant owner in your state? We pulled average salaries for restaurant owners by state according to ZipRecruiter. Washington has the highest average salary for restaurant owners and North Carolina has the lowest.
|State||Annual Salary||Monthly Pay||Weekly Pay||Hourly Wage|
Top 10 Paying Cities For Restaurant Owners
In addition to looking at salary by state, we also pulled the top 10 cities in the United States with the highest average annual income for restaurant owners.
|City||Annual Salary||Monthly Pay||Weekly Pay||Hourly Wage|
|San Francisco, CA||$83,258||$6,938||$1,601||$40.03|
|Santa Clara, CA||$82,050||$6,837||$1,578||$39.45|
How Do Restaurant Owners Get Paid?
One of the confusing factors for many entrepreneurs is how exactly they get paid. The answer to that question depends on how your restaurant is structured.
If your business is a separate legal entity, then the profits and expenses belong to the company. As a restaurant owner, you will then be paid a salary. Any profits that remain after expenses like rent, taxes, and payroll can be distributed as draws or distributions. There are a lot of tax advantages of setting up your restaurant as a separate legal entity (such as a S corporation). A legal or tax professional can help you decide the best way to handle incorporation based on your specific needs.
Alternatively, if your business is set up as sole proprietorship, the restaurant’s profits are considered the same as your income for tax purposes. As the owner, you can pay yourself as you like – but there are benefits to paying yourself a regular salary so that you can get a better idea of exactly what your expenses are each month.
If your restaurant is profitable, you will want to pay yourself less than 50% of the profits as a salary. The remainder of the restaurant’s profits (i.e., money left over after paying expenses) should be used towards things like paying down debt or investing in the future of your business through marketing, equipment, or staffing. These profits may also be distributed to investors in the restaurant.
It is important that you carefully calculate your net profits when deciding what salary is appropriate. Net profits are what remains after expenses are paid – as opposed to gross revenue, which is all of your sales. Before you pay yourself, you have to make sure that all of your other obligations are met, including payroll, utilities, rent, and taxes.
Challenges of Owning Your Own Restaurant
There are a lot of upsides to owning your own restaurant – such as the chance to really build something for yourself and your family. But there are also some challenges, particularly when it comes to getting paid.
One of the biggest issues that many restaurant owners face is that profits are often not consistent. As a result, their own paycheck might not be steady.
For example, a restaurant that is more seasonal – with huge profits in the summer when tourists flock to the area and low profits in the colder months – there might be a huge difference between how much you are paid month to month. One way to address this is by smart, careful planning. Using financial data like profit and loss statements to predict your profits at any given time can help ensure that you have enough of a cushion to float you through the leaner times and keep your salary more consistent.
At the same time, there may be times in your life as a restaurant owner that you don’t get paid at all. Expenses can eat into your net profits pretty quickly, especially if you have a big unexpected expense, like a refrigerator unit that fails. Having to buy a new cooling system and pay for food at the same time can really put a dent in your profits. During these times – or when you’re just getting started – you may not be able to draw much of a salary at all.
Again, careful planning can help to alleviate some of these issues. Using tactics like smart scheduling and inventory tracking can help to ensure that your costs are as stable as possible. That way, when you run into a big expense, you are able to cover it without forgoing your own paycheck.
Budget Branders Is Here for You
There is no doubt about it – running a restaurant is hard. In some cases, you may not even reap the financial rewards of owning your own restaurant until years after you first open your doors. One of the best ways to increase your restaurant’s profits (and therefore your own salary) is by using smart marketing and advertising to increase sales.
Budget Branders offers a simple, cost-effective solution for entrepreneurs. We offer a full range of disposable cups, coffee sleeves, take-out bags and bowls that are ready to be personalized with your restaurant’s name, logo, and/or slogan. By using these high quality products in lieu of plain disposables, you can reach more potential customers – and increase your market share.
All of our products are sold at prices and in quantities that work for independently owned restaurants. To learn more or to get a quote on our products, fill out our online contact form, or hit the “live chat” button.