How to Increase Restaurant Revenue According to Alex Hormozi

This is the juiciest advice for owners or managers trying to increase their restaurant revenue.

These are my notes from the episode 886 from The Game podcast from Alex Hormozi. This episode is so full of strategies on how to increase restaurant revenue that I had to take notes, now I’m sharing these notes with you.

successful restaurant that knows how to increse its revenue

The Challenges You Will Learn to Overcome

Many restaurant owners face similar hurdles. These are some of the common ones Alex Hormozi helped this restaurant tackle:

Increasing sales every day of the week: Many restaurants are generally fully booked on the weekends, but not as busy during the week. How do you get bums on seats on days that are usually quiet?
Boosting takeaway sales: Tapping into the growing market of customers who prefer to eat at home.
Upping alcohol sales: A great way to increase the average spend per customer.
Opening a second location: This is a big one! Alex’s advice here is gold: “Nail it, then scale it.” Make sure your first location is absolutely optimised and humming along perfectly before you even think about a second spot. It might take a bit longer to get that second location open, but by having your first one fully sorted, you’ll reach your tenth location much quicker in the long run.

Lesson 1. Your Product Needs to Be Superior

First things first, your food is everything. Seriously! Word-of-mouth (WoM) is massive for restaurants, and it all starts with an amazing product. Think about it: if you have one customer who absolutely adores your food, they’ll tell everyone they know, and your business will grow naturally.

On the flip side, if your food is just “okay,” people might visit once and never return. In that case, you’d constantly be scrambling for new customers, which is a tough way to run a business. If your product is top-notch, marketing simply helps you fill up faster. But without that fantastic food, you’ll always be chasing your tail.

Lesson 2. Small Pricing Changes Can Bring Big Profits

You might be surprised how a few tweaks to your pricing can significantly impact your bottom line.

In a restaurant, where margins are low, a small price increase becomes a sizeable jump on net profit.

The maths behind menu items profits

Let’s explore the maths behind it. If you have a dish that sales for $10 and a profit margin of 10%, that means that you make a net profit of $1 every time you sell that dish.

If you increase the price of the dish by 5% to $10.50, the net profit on that dish goes from $1 to $1.50, that’s a 50% increase in profit.

Processing Fees or Slight Increases

Hormozi offers two ways to achieve the price increase.

Charging a Processing Fee

The first option is passing on the card processing fee to the client. This is quickly becoming a common practice, and it’s quickly becoming an industry standard practice.

An advantage of using this approach is that you don’t need to make any modifications to your menu.

You can easily check your annual or monthly card processing fees to estimate your income improvements.

Let’s use Square at 1.6% surcharge as an example. The price of a $10 dish will become $10.16, leaving a net profit of $1.16 instead of $1. While this looks tiny, it is a 16% of net profit income without doing much.

Adding .99 to every menu item

Alternatively, Alex suggested adding .99 to all the menu items, for example an item would go from $16 to $16.99.

Imagine if you applied this to every order over a year! The Thai restaurant from the podcast serves 100,000 customers who each order two items, that’s potentially an extra $200,000 in net income without really changing anything else. These small changes really add up when you have high customer volume.

Keep in mind

The “.99” pricing style works well for upper-middle-range restaurants. If you run a high-end establishment, it might not align with your brand’s image.

Lesson 3. Get fully booked every day of the week

Alex says, the way to fix a not fully booked restaurant during weekdays is increasing the pricing on the weekends.

This was suggested because the restaurant highlighted in the podcast has people lining up on the weekends to dine in there.

Alex didn’t dive too deep into this strategy, so an exact price increase percentage wasn’t suggested. However, the important thing to consider in this strategy is to frame the weekday pricing as a discount, rather than the weekend pricing as an additional surcharge.

Written by

Pablo A Santamaria

Entrepreneur & developer with a passion for CSS & SaaS. CoFounder of Koala Widgets.