Find out what expenses restaurant owners often overlook.
- When marketing for your restaurant, you should use only about 3% to 6% of your sales for your marketing budget.
- You should only expand by 6% temporarily and if you have a good reason for doing so.
- You should consider following the 70/20/10 rule for applying your marketing budget.
Your new restaurant might serve the best food in town, but if no one knows about it, you will never have enough customers to stay in business. Even if you have a great restaurant with first-class service, you need to create a marketing plan to spread the word about your business.
Tips on marketing budgets for restaurants
Marketing your restaurant is important, but it is just as important to stay within a reasonable budget. According to Gourmet Marketing, the general rule to follow for marketing is it should be about 3% to 6% of your sales. While these tend to be guidelines, you should only fall outside of those figures with a good reason. If you have an increase of over 6%, it should only be a short-term situation. Hopefully, the extra money you are putting into the marketing increases your sales and you will be under 6% again. They go further by saying that restaurants should not attempt to compensate for customer behavior with marketing. Restaurants should spend more money on marketing during their busy seasons and less when business is slower.
Small Business Trends shows that by mid-2017, restaurants were spending on average about 1.93% of their sales on marketing. This is slightly lower than the recommended 3% of sales. They do note that if spending on that amount on marketing has worked in the past for a restaurant, then they may want to continue spending that same amount in the future.
Where should restaurants spend their marketing budget?
Each restaurant is a little different and that dictates what type of marketing may work best. However, no matter which time of marketing is used, it should be trackable. Gourmet Marketing offers tips on how to make the most of your marketing budget. You should consider starting slowly with any type of marketing that you choose. The more creative you can be with your marketing allows you to spend a little less money and still find results. You must continue to refresh your marketing. You cannot set it and forget it and expect it to continue to work for you.
When determining where you should spend your marketing budget, you should decide what your objectives are for your marketing. TM Trademark Creatives suggests breaking your marketing budget into a 70/20/10 model. They understand that you do not want to limit yourself when it comes to marketing, and you always want to be able to take advantage of some new way to advertise digitally. With that in mind, you also want to invest the bulk of your budget (70%) in marketing techniques that have been most successful for you in the past. Putting all of your budget into what you have always done is also a mistake, so keeping that around 70% is a good model.
Ten percent of your budget can go to testing completely new approaches. You should not expect to see any initial return on this investment. You should constantly look for new ways to market to see what kind of business that brings to you, but you do not want to spend a significant part of your budget on it. The last 20% goes to marketing that you tested in the previous 10%. Whenever you try something with 10% of your budget and it is successful, you want to move it to the 20% of your budget area, then you can try something new with the 10%. This way, you are constantly trying something new while spending the bulk of your budget on what you know works.
Restaurant marketing hidden costs to keep in mind
When you create your plan, it is important to identify the hidden costs of restaurant marketing. If you target costs early on in your planning process, you will not have to worry about going over your budget. Here are a few hidden costs that may present themselves when marketing your restaurant.
Everyone knows that an attractive, user-friendly website is the first step in advertising your business. While modern website builders make designing a website for your business easier than ever, a website does not come free.
Behind-the-scenes costs of a good professional website include fees for website hosting, a website-building platform, a domain name and, if you do not have the time to create your own site, a customized template. Some of these, like a template creation fee, are just one-time fees. Other fees, like website hosting, may be monthly.
Direct mail and email campaign
Direct mail and email campaigns are good ways to keep your business top of mind with customers and promote upcoming events or sales. While these are each effective tools for promoting your company, the costs add up. If you are on a budget, an email marketing service is your best option. Small business plans start at around $50.
If you decide to do a traditional mailing campaign in conjunction with or in lieu of an email marketing campaign, then make sure to budget for printing and mailing, which can cost hundreds of dollars per month.
Loyalty programs and contests
Other costs that business owners frequently overlook are those of discounts and giveaways. For example, if you run a loyalty program where you offer the sixth meal free, you need to consider the cost of the "free" meal as a marketing expense and budget accordingly. The same is true for contests and other discounts that you offer.
Marketing your restaurant is vital to a successful business. While marketing might be a major expense, it is not something you can afford to overlook or omit from your business plan. When you create your budget, make sure to look closely at your marketing plan to identify hidden costs. By recognizing hidden costs early in the process, you can save yourself time and stress.