Restaurant Business Overview

Full-service restaurants provide seated dining experiences where customers order food and beverages from wait staff and pay after their meal.

The common business models in this sector include:

• Traditional Dining Restaurant: Food service focused on a particular cuisine or cooking style with table service and moderate pricing
• Fine Dining Restaurant: Upscale establishments offering premium ingredients, expert preparation, and elevated service with higher price points
• Family Style Restaurant: Casual atmosphere with larger portions meant for sharing and a menu that appeals to various age groups
• Bistro/Café: Smaller establishments offering lighter fare throughout the day with a more intimate dining setting

Related: Checklist to Start a Business

How Do Restaurants Make Money?

Full-service restaurants generate revenue through various channels centered around providing food and beverages in a dining setting. The establishment’s income depends on the type of service offered and the target market.

A restaurant’s revenue typically comes from several sources that work together to create a profitable operation.

• Food Sales: The primary source of income comes from selling prepared meals to dining customers. This makes up the largest portion of revenue because restaurants can maintain good profit margins through efficient ingredient purchasing and menu pricing.
• Beverage Service: Sales of both alcoholic and non-alcoholic drinks contribute significantly to revenue. Alcoholic beverages often provide higher profit margins than food items.
• Private Events: Restaurants rent out space for celebrations, corporate gatherings, and special occasions, combining food service with venue rental fees.
• Catering Services: Many restaurants expand their reach by providing food and service for events at external locations.
• Gift Cards: Prepaid cards for future dining experiences create upfront revenue and encourage return visits.
• Merchandise: Some restaurants sell branded items like t-shirts, coffee mugs, or packaged food products.
• Delivery Services: Partnering with delivery platforms or offering in-house delivery allows restaurants to serve customers beyond their dining room.

Industry Statistics

Single-location full-service restaurants (NAICS 722511) include independently owned and family-operated dining establishments where customers order while seated and pay after eating.

Here are some statistics that show how this industry has performed:

Restaurant Industry Size & Growth: The full-service restaurant industry generated $241.1 billion in revenue last year. The industry experienced an annual growth rate of 2.6% over the previous five years. Growth projections remain positive for the next five years, driven by increased consumer spending on dining out and rising disposable income levels. (IBISWorld)

Number of Restaurants: There are 147,000 single-location full-service restaurants operating in the U.S. The industry remains highly fragmented, with no single company controlling a significant portion of the market. This fragmentation occurs because most establishments operate as independent businesses rather than chains or franchises. (IBISWorld)

Restaurant Profit Margin: Full-service restaurants typically maintain profit margins between 3% and 5% of total revenue. Menu pricing, food costs, labor expenses, and overhead costs like rent and utilities influence these margins. (IBISWorld)

Also See: Ideas for Naming a Restaurant

Costs To Start a Restaurant

Starting a full-service restaurant typically costs between $275,000 and $850,000. This range reflects differences in size, location type, and dining concept.

Here are some of the common expenses needed to open a restaurant:

Building and Location Costs: Restaurants need commercial space with both a dining area and kitchen facilities. The space requires proper ventilation, plumbing, electrical systems, and compliance with health codes. Costs include the first and last month’s rent, security deposit, and any needed renovations or buildout expenses.

Commercial Kitchen Equipment: A restaurant needs various cooking equipment like ovens, ranges, fryers, refrigerators, freezers, prep tables, and dishwashing stations. Additional equipment includes food warmers, ice machines, and food storage containers. The total cost varies based on whether the equipment is purchased new or used.

Furniture and Fixtures: The dining area needs tables, chairs, booths, lighting fixtures, and decor to create an appropriate atmosphere. Additional items include host stations, server stations, and a point-of-sale system for processing payments.

Initial Inventory: Starting inventory includes food ingredients, beverages, seasonings, cooking oils, and cleaning supplies. Paper products, dishware, glassware, and utensils are also needed before opening.

Licenses and Permits: Restaurants require various permits, including health department certification, food service license, and liquor license if serving alcohol. Additional permits may be needed for outdoor seating, music, or specific food handling procedures.

These costs represent general estimates, and final expenses will vary.

Resources: 
American Restaurant Association
FSR Magazine
Green Restaurant Association
National Restaurant Association
Restaurant Business
Restaurant Owner