February 14, 2025 - The restaurant industry’s financial performance has fluctuated in recent years, yet some top-performing restaurants have maintained strong performance with 22% earnings before interest, taxes, depreciation, and amortization (EBITDA), according to our 2024 Restaurant Industry Benchmarking Survey. In stark contrast, mid-performing restaurants saw an EBITDA of just 14%, while low performers lagged far behind at 4%.

Why is the EBITDA for high-performing restaurants significantly higher, and what accounts for the wide gap between them and their peers?

While location plays a role, the primary difference lies in how these restaurants operate. Top-performing restaurants handle each expense category, from food and beverage costs to labor costs to marketing costs, differently, adopting strategies that others may overlook or are unaware of.

In this article, we will explore the four key habits that enable top-performing restaurants to generate more revenue than others:

• They manage ingredient costs with POS-integrated software
• They have an ongoing brunch and lunch operation
• They regularly renegotiate with vendors
• They join GPOs to leverage collective purchasing power

Manage Ingredient Costs with POS-Integrated Software

Strict and regular inventory management — conducted at least weekly —is a great way to save costs on food and beverages. Top-performing restaurants understand this and often use inventory management tools to calculate the cost of every ingredient in each menu item. It allows them to monitor food and beverage costs weekly so they can control expenses.

Top performers also integrate inventory management tools with a point-of-sale (POS) system to match inventory usage and sales data. This integration allows them to calculate the profit margin of each menu item in real-time so they can make data-driven decisions on pricing, menu adjustments, and promotions.

Eighty-six percent of restaurants use POS data for promotions, upselling, and loyalty, according to Hospitality Tech. And 64% use it to optimize the menu and reduce food waste.

Ongoing Brunch and Lunch Operation

While low-performing restaurants spent 28% of revenue on food, beverages, and disposables, top performers managed to keep this figure at just 22%, thanks in part to their strong brunch and lunch business.

It can be profitable for restaurants to offer brunch service because they often use economical ingredients like grains and potatoes, which overlap with other menu items, thus reducing waste and inventory costs.

Brunch often attracts large groups that cycle through quickly, turning tables over and making the service even more lucrative. Also, brunch menus often feature high-margin cocktails like mimosas and Bloody Marys, boosting average check sizes.

Lunch service offers similar advantages. More than half (53%) of respondents in a BLS consumer expenditure survey buy lunch away from home, a higher rate than other meals. Restaurants that offer lunch can see good margins, especially if they provide simple menus with ingredients that serve multiple dishes. This reduces waste and allows them to make orders in bulk, reducing overall costs.

Regularly Renegotiate with Vendors

Top performers never get too comfortable with their vendors. Instead, they continuously renegotiate supplier agreements to ensure they get the best price, quality, and service. While maintaining relationships with preferred vendors can be convenient, excessive loyalty may prevent restaurants from accessing more competitive deals.

To stay ahead, review vendor invoices diligently and evaluate significant vendors on quality, price, and delivery. A high score for all three metrics means you are likely getting the best service and fair pricing. But if the ratings fall short, consider renegotiating, requesting new bids, or requesting prices from new vendors to benchmark against current market rates.

Join GPOs to Leverage Collective Purchasing Power

Group Purchasing Organizations (GPOs) allow smaller restaurants to pool their purchasing power to access significantly lower prices and better contract terms with suppliers – similar to how Costco and many other bulk-buying businesses operate.

Some major GPOs like Entegra claim restaurant owners can save up to 30% on inventory, and others, like Buyers Edge and Dining Alliance, offer competitive purchasing advantages.

Alternatively, you can look for smaller GPOs for a more personalized service or fewer membership restrictions. Search online or ask other local restaurant owners or suppliers for recommendations to smaller groups.

Emulate Top Performers by Regularly Tracking Inventory

Our restaurant benchmarking survey revealed that low-performing restaurants often struggle to monitor their costs effectively and on time. As a result, they often cannot explain fluctuations in expenses between periods or make timely adjustments to pricing, portions, or menu items to protect their margins.

Regular inventory counts and financial reports could help restaurants identify these fluctuations to find opportunities to reduce waste, improve operations, and drive more revenue.

The current shortage of skilled finance and accounting talent leaves many restaurants without the expertise to create reports that can provide valuable insights. Citrin Cooperman's Restaurants and Hospitality Industry Practice works collaboratively with you to reach your business and personal goals, from inventory management and organizational structuring to cash flow analysis and profitability optimization. By utilizing our outsourced finance and accounting solutions, you also gain access to experienced professionals when needed — without incurring the overhead costs of full-time staff.

Our flexible, cost-effective solutions ensure you have the insights and support to make data-driven decisions, keep costs under control, and achieve your desired financial outcomes. Please contact our Restaurants and Hospitality Practice to speak to a professional about managing your restaurant’s finances and accounting.