Are you pouring your heart into your restaurant and still wondering why your margins are so low?
Do you feel like you're doing everything “right,” but the profits never seem to come?
You’re exhausted from 70-hour workweeks and the stress of wondering if next month is going to break you.
At Patrick Accounting, we’ve worked with restaurant owners for more than 20 years, and we’ve seen the same story again and again: When margins are low, it’s a math problem. And that math problem comes from five specific, fixable issues in your restaurant.
In this article, we’ll break down the five biggest reasons restaurant margins disappear. You’ll learn:
- What a “healthy” margin actually looks like
- How to spot specific margin-killers in your restaurant
- What to fix first to get back on track
But let’s start with the math.
Why Restaurant Margins Leave Zero Room for Error
Even in ideal conditions, a restaurant might make 10–15% profit. We've seen some extremes on the higher end, but many don’t make much money at all.
That’s because restaurants operate like a 24/7 math equation:
- Watch food costs down to the ounce
- Manage labor down to the shift
- Negotiate with suppliers
- Track inventory relentlessly
- Price strategically
And you have to juggle all of that while seating guests, training staff, and putting out (metaphorical) fires. It's a 24-hour grind with high turnover, intense competition, and no margin for sloppiness.
Great restaurant operators are disciplined. They obsess over their numbers. And that obsessive tracking is the only way to keep margins alive.
Let’s break down the five biggest areas where those margins get destroyed.
1. Food Cost Problems: Where Most Money Quietly Walks Out the Door
Food cost is the first place to look when margins slip because it’s one of your biggest expenses and one of the easiest to lose control of.
Theoretical vs. Actual Food Costs Don’t Match
- Theoretical food cost: What your menu item should cost
- Actual food cost: What it actually costs
If your theoretical cost for a burger is $4.50 but your actual cost comes in at $5.25, the difference is usually coming from:
- Portion inconsistencies
- Spoilage
- Theft
- Poor receiving
- Supplier substitutions at higher prices
Restaurants with healthy margins calculate theoretical costs for every major menu item and compare them regularly. When a number is off, they investigate.
Broken Receiving Processes
A shocking amount of lost margin actually happens at the back door.
If no one is verifying deliveries, you may find yourself paying for:
- Missing products
- Lower-quality substitutions
- Higher-cost replacements
- Incorrect quantities
Every single delivery needs a checklist and a responsible person assigned. If something doesn’t get checked in, it’s definitely going to cost you.
2. Labor Management Problems: Where Staffing Decisions Can Destroy Your Margins
If food cost is where money walks out the door, labor is where it catches fire.
Hiring Out of Desperation
When a restaurant owner hires “whoever shows up,” the risks multiply. Staffing out of desperation is expensive. You may find yourself faced with:
- Theft
- Poor management
- Low performance
- Culture problems
- High turnover
- Costly mistakes
Intentional hiring is always cheaper than emergency hiring.
Not Cutting Labor When Sales Drop
The other side of the equation is that you also have to be willing to cut labor when you need to.
Profitable restaurants:
- Monitor daily sales forecasts
- Adjust schedules proactively
- Send people home when traffic slows
- Train managers to manage labor with the same intensity you do
Whether it’s manual or automated, you can’t leave this to guesswork.
3. Third-Party Delivery Problems: How Delivery Platforms Drain Your Profits
Platforms like DoorDash, Uber Eats, and Grubhub can bring new customers, but they can also destroy your profitability.
Commissions often run 15–30%, and that’s before:
- Reduced menu pricing for competitive listings
- Increased operational complexity
- Packaging costs
- Increased risk of order errors
If you’re not analyzing platform-by-platform profitability, you may be losing money on every order without realizing it.
4. Inventory Control Problems: How Money Disappears Without You Noticing
Inventory is one of the easiest places for margins to crumble. You’re looking at:
- Spoilage
- Theft
- Incorrect counts
- Over-ordering
- Poor portioning
- Giveaways
- Unmonitored transfers
The best restaurant operators know their weekly usage for every key ingredient. They manage inventory intentionally, not during the dinner rush.
Someone has to own this. Period.
5. Pricing Problems: When Fear-Based Pricing Leaves You Underwater
One of the biggest mental blocks we see in the restaurant world is with pricing.
“If I raise prices, people will stop coming.”
But that fear leaves most restaurants chronically underpriced.
Your guests are more flexible than you think. They value:
- Quality
- Consistency
- Cleanlines
- Experience
Restaurants with healthy margins review pricing at least once a year and make changes without apologizing. Underpricing isn’t an act of generosity. In fact, it can be financially destructive.
What Profitable Restaurants Do Differently
After two decades of working with restaurants in the Memphis area and beyond, we’ve seen some clear patterns. Profitable restaurants:
- Track their numbers religiously
- Hire with intention and retain great people
- Maintain clean, consistent operations
- Adjust prices regularly and confidently
- Treat the restaurant like a system and not a passion project
Running a successful restaurant requires a disciplined operator.
You Don’t Have to Fix These Margin Problems Alone
Low restaurant margins aren’t just “part of the business.” They’re the result of specific, solvable problems that show up in nearly every operation we’ve worked with.
It's easy to feel overwhelmed when you're trying to manage food costs, labor schedules, delivery platforms, inventory, and pricing, all while serving guests and keeping your team afloat. These issues can stack up fast, and even one broken system can drag your entire margin down.
One of the biggest areas where restaurants lose control? Labor. It’s where money gets burned fastest when it's not managed with precision. For more on this topic, check out our article, “Top Labor Cost Mistakes That Hurt Restaurant Margins.” It breaks down the most common issues we see and how to fix them.
At Patrick Accounting, we help restaurant owners fix the financial leaks that keep their margins thin and their stress high. If you're tired of running on fumes and trying to figure it all out on your own, we’re here to help you build a sustainable restaurant that's more profitable and less stressful.
