The Biggest Expense in Running Your Restaurant: Empty Seats

Hey, Jeremy Hood here, founder of Restaurant Results Partners. For those of you who don’t know, we help restaurants make more money by increasing sales and profits. Today, I have a little pop quiz for you: What’s the biggest expense in running your restaurant? What’s the biggest cost that you incur?

If I asked a hundred people this, I’d venture to guess that many would say labor, rent, or some other P&L line item. But today, I’m going to challenge that and say the biggest expense is actually an empty seat.

Let’s walk through a live example with real numbers from one of our clients. Think about how much money you spend just to open your doors every day, to turn the lights on. It’s quite a bit. Let’s break these costs down one by one.

Understanding Fixed Costs

Today, we’re talking about fixed costs. These are the expenses you have to pay every month just to open your restaurant.

1. Rent: You probably signed a lease, so you must pay rent every month, regardless of your sales.
2. Utilities: They might fluctuate a little with volume, but nothing significant. This includes electricity, water, waste removal, grease removal, and grease trap service.
3. Insurance: Liability, workers comp, auto insurance (especially if you do catering), are all necessary.
4. Labor: While not entirely fixed, there is a minimum amount of labor needed. For example, in this restaurant, the minimum is three people, who can handle up to $1,500 or even $2,000 in sales before needing more staff.
5. Software and Services: POS systems, bookkeeping, websites, phone services, and laundry for aprons, towels, and linens.
6. Licenses: Necessary for legal operation.

This isn’t a completely exhaustive list, but it covers the major fixed costs. Just to open the doors, this restaurant spends over $10,000 a month. They have about 42 seats, and if you divide that by the number of days they’re open, it comes out to around $400 a day or nearly $10 a day per seat, just to turn the lights on.

The Cost of an Empty Seat

Let’s dive deeper. This restaurant is open for about eight hours a day, meaning they spend $1.21 per seat per hour just to keep the doors open. Whether 10 people come in or 200, these costs remain.

Calculating break-even sales based on these numbers, with food costs around 35%, this restaurant needs to make about $600 a day to break even. With an average ticket of $10, they need about 62 customers daily.

The Importance of Filling Seats

To break even, they need to fill the dining room twice daily. The most expensive cost in running a restaurant is an empty seat because all these fixed costs remain the same. Labor may vary slightly, but it’s a minimal increase up to a certain sales point.

Once you’re at break-even, even spending money on advertising or offering discounts to fill seats adds more dollars to the cash drawer. For instance, spending on ads to generate $500 in sales might cost $250, but that’s still an extra $250 in profits.

Final Thoughts

To scale your profits, focus on filling those seats. Every empty seat represents potential lost revenue. Think about ways to consistently attract customers and keep those seats occupied.

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