Being in the restaurant business, you have a lot to think about. From your daily operations to ensuring you have enough customers daily to keep the lights on.
Working with many different restaurants over the years, we understand the importance of not only running your business but also expansion and growth.
In fact, many restaurant owners reach out to us because they’re looking to maximize their seating count by using large umbrellas to create additional seating areas. Ideally, without the added costs of constructing a space or opening a new location right away.
The real question is, will adding umbrellas really grow your restaurant?
Let’s dive in and take a look…
How Umbrellas Can Increase Your Restaurant’s Top Line Revenue
As a restaurant owner, you’ve probably heard a dozen ways from your peers and personal research about how to increase your restaurant business.
There are essentially 4 ways to increase a restaurant’s sales:
- Increase your number of customers.
- Increase your return rate of those customers.
- Increase the total spend per customer.
- Increase your number of turns or covers per table.
Since restaurant throughput is mostly measured in “turns” per table, or the number of successive seatings per day, and also by the number of “covers” (seated diners) per night let’s look into how umbrellas can help you increase those numbers.
Increasing Your Total Potential Customers
For illustration purposes, let’s take a look at a burger restaurant owner named John, who is looking to create a new outdoor dining space.
John’s restaurant was recently featured for their unique burgers and has attracted more locals on the weekend. The problem is, he doesn’t have enough seating available. So he’s seen potential customers leaving due to the long wait times.
John has achieved #1 above, to get more customers, but his limited space is keeping him from achieving #4 of more turns and covers since his space is booked.
John, being the creative guy he is, contacted the owner of the building about the empty lot behind the restaurant. He would love to turn it into an outdoor patio dining area for the restaurant to give him the extra space he needs.
The problem is, even though business is picking up, he doesn’t have enough capital to front the cost of adding a whole new building addition without taking a large loan.
Looking for alternatives, John remembered having a romantic dinner at his favorite Italian restaurant with his wife for their anniversary. He remembered being seated outdoors under large umbrellas. What if that could work?
Each day, John averages 3 “turns” per table, with an average check of $50.
Doing some back of the napkin calculations, John calculates that by adding 8 new tables to his future outdoor area he will add an additional $1200 per day (8 tables x $150 revenue per table).
To John, it sounds like a great alternative, but he’s also thinking about how much it will cost to get it all up and running.
Investing in Outdoor Umbrellas to Increase Restaurant Business
Any investment in your business should be looked at to determine whether it will produce some type of ROI, even outdoor umbrellas.
John, our example restaurant owner, is considering investing in outdoor umbrellas to add the extra patio area needed for his booming burger business.
His quote for the construction of a new addition to the building would require him to take a large loan he wants to avoid. It would also take months of construction time before he could see it come to life.
After speaking with an umbrella specialist, he knows he will need only 2 large umbrellas to create the extra space he needs for 8 new tables.
2 Large commercial umbrellas x $3,000 each = $6,000.00
8 Stainless steel tables x $65.00 each = $520.00
16 Natural finish chairs x $48.00 each = $768.00
Total upfront investment = $7,288.00
*Your numbers can be more or less depending on the umbrella model, customizations, furniture, etc.
Now let’s look at how that translates into profit and creates an ROI for our restaurant owner…
John’s Return on Umbrella Investment:
With 3 turns per table x $50 for the average check = $150 per new table
8 New outdoor tables x $150 = $1200 per day additional revenue.
Let’s say John only fills these 8 tables on the weekends when he’s most busy.
This would be an additional $2400 per weekend, $9,600 per month, or $115,200 per year for John.
Using this simple ROI calculator, we can determine that John would get a 1480.68% return on his initial investment of $7,288.00 in the 1st year.
Try getting those numbers in the stock market.
But Is It Truly Profitable?
Now, I can hear the skeptics and keyboard warriors screaming that this is revenue, not profit.
So let’s look at real profit numbers also as we want to be 100% transparent and realistic here.
Since every restaurant is different, and restaurant profit margins vary by type, from full service to fast food, we’ll stick with a baseline of 6.5% net profit based on research done by SageWorks.
With a 6.5% net profit margin, our example owner John would net an extra $624 per month or $7488 per year from his outdoor patio investment. ($9,600 additional revenue x 6.5% profit margin).
This means it would take our owner John just under 1 year to recover his total investment from net profits and still have a 2.74% ROI.
By year 2 he will see a 105.49% return with an annualized return of 43.35%.
What’s great is, truly commercial-grade umbrellas like those here at Poggesi, will last for many years, continually providing John a positive return on his initial investment.
Can Outdoor Umbrellas Increase Your Business?
Over the years, we have spoken with hundreds of business and restaurant owners about this topic. The truth is, it’s different and varies for every restaurant.
If you’d love to do the numbers with us, and speak with one of our experts to help determine if it’s a worthy investment feel free to reach out for a no-obligation consultation.
If not, we still hope this article gave you some ideas about growing your restaurant business and the potential of adding outdoor areas without the need for high construction costs.