Did you know that approximately 60% of restaurants fail within the first year of operation? Isn’t that a depressing statistic?
Even if you serve delicious cuisine that would make Gordon Ramsay cry, success in the competitive restaurant market is not guaranteed.
Your culinary marvels could quickly become lost in the flood of dining options if you don’t have a strong marketing plan and the financial resources to support it.
So, how much money should you spend on marketing? And where should you spend your hard-earned money to have the greatest impact?
In this detailed guide, we’ll go into the nitty-gritty of Average Marketing Budget for a Restaurant and industry benchmarks, delivering actionable recommendations to help you maximize the amount you spend. So let’s get started.
What is a Restaurant Marketing Budget?
Marketing entails a variety of methods that help you determine what your customers want and how to meet their demands. Restaurant marketing assists in creating, communicating, and delivering value to restaurant customers.
A restaurant marketing budget is a strategy that outlines how much money a restaurant will spend on marketing over a given time period. It precisely outlines the amount of money that is to be spent on various forms of marketing and advertising operations. The budget should be realistic and appropriate for the restaurant’s financial status. Due to its ability to analyze spending and make restaurant business operations successful, a restaurant marketing budget is crucial.
If you view a restaurant marketing budget plan to be a capital expenditure, you won’t have much to worry about during difficult times. You can also maximize your budget based on the current state of the restaurant sector. Therefore, a thorough grasp of the nature of the expenses involved is necessary when developing a restaurant marketing budget.
Importance of Restaurant Marketing Budget
- A well-defined RMB enables you to prioritize projects that are aligned with your company’s goals, thereby fueling strategic growth.
- To easily maximize future efforts, RMB assists you in tracking your expenditures and calculating the return on investment of your campaigns.
- A well-defined budget keeps you focused on cost-effective tactics and discourages impulsive purchases.
- Market costs have the potential to rapidly become out of hand. RMB allows you to predict marketing expenses within your budget and establishes expenditure caps.
Average Marketing Budget for a Restaurant
Below is a breakdown of the average restaurant marketing budget depending on industry benchmarks and other factors:
National Averages
Restaurant marketing budgets typically range from 3-6% of total revenue. This range is frequently used as a broad rule of thumb. Keep in mind that your particular marketing budget may vary depending on a number of factors (more on that later in this piece).
To build brand awareness and establish its position in a competitive market, for example, a recently launched restaurant may wish to spend more than the national average. Conversely, a well-known eatery with a devoted clientele could cut back on marketing expenditures, at least temporarily.
What’s the conclusion?
Don’t take that 3-6% number at face value. It’s a good starting point, but how much you spend on marketing should ultimately depend on the particulars of your restaurant.
Variations Based on Restaurant Type
Different restaurant sectors and geographical areas have different optimum marketing budgets. Let’s explore it.
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Fast Casual
On average, fast-casual restaurants like Panera Bread and Chipotle have an average of 2-4 percent. In order to attract clients, these restaurants mostly rely on convenient locations and brand familiarity. As a result, they allocate a larger portion of their budget to superior components and services, which effectively promote themselves, rather than external marketing.
However, in order to stand out early on, new fast-casual establishments in crowded marketplaces could rely more on grand opening promotions.
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Quick-Service Restaurants (QSRs)
QSRs, such as your favorite burger joints and pizza restaurants, often devote a larger portion of their earnings to marketing. These businesses heavily rely on digital advertising and local shop marketing to increase foot traffic and online orders, with a median spend of 4.6%.
For instance, in order to maintain their competitive edge in the fast-food industry, pizza franchises such as Papa John’s and Domino’s frequently invest over 6% of their sales in marketing.
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Coffee/Bakery
Generally speaking, bakeries and coffee businesses spend the least on marketing. On average, they give 2.6% of sales to marketing activities. To draw clients, these companies frequently rely on social media, local store marketing, and word-of-mouth.
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New Restaurants
According to industry experts, new restaurants should initially devote 25–35% of their gross income to marketing. This tends to be on the higher end of that range in a highly competitive field. Consider it an investment in your future prosperity.
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Established Restaurants
It is recommended that well-established eateries allocate 12–18% of their whole sales to marketing. The precise percentage is determined by variables such as profit margins and competitiveness. Spending more could be necessary to maintain your competitiveness if your profit margin is narrow.
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Fine Dining
Michelin-starred restaurants and premium steakhouses appeal to affluent consumers.
Branding and reputation are crucial for these businesses, even though there are no precise figures on their marketing spend. To draw in their target audience, they thus make significant investments in experiences.
Variations Based on Restaurant Location
The best way to allocate marketing funds depends on a number of factors, including population density, demography, tourism levels, and the competitive environment.
Here is an overview:
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Big Cities
There is intense competition for restaurants in major cities like New York, Los Angeles, and Chicago. Consequently, they frequently have to devote a larger portion of their budget to marketing. Marketing costs may also rise as a result of the high cost of living and doing business in these places.
Restaurants in large cities may invest more than 10% of their earnings in marketing. To distinguish oneself in a congested market, this expenditure can include a combination of local sponsorships, internet advertising, etc.
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Suburban Areas
The competitive set is most likely more manageable in suburban strip malls and office parks. Lower rent expenses free up funds for marketing strategies such as direct mail postcards, community event sponsorships, and local TV or radio advertisements.
Retention marketing is a key strategy used by prosperous suburban eateries to foster repeat business. Here, we estimate that 4-7% is allocated to marketing.
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Rural Destinations
Due to less competition and lower advertising rates, restaurants in rural areas frequently have lower marketing costs. In this case, restaurants should aim to allocate between 3% and 5% of their earnings to marketing.
Local newspaper ads, neighborhood gatherings, and social media efforts aimed at neighboring towns can all be funded with this money.
Factors to Consider When Planning Your Budget
When estimating your restaurant marketing budget, you should consider the following factors:
Restaurant Size and Location
Your restaurant’s size and location can both have a major impact on your marketing allocation. For example, a major restaurant in a busy metropolis may require a larger marketing expenditure than a small restaurant in a rural location.
This is due to the fact that the bigger eatery will probably face more competition and have to spend more money on marketing in order to stand out. In a similar vein, a restaurant in a popular tourist destination may have to invest more in marketing to draw in customers than one in a neighborhood that serves more locals.
Target Audience
Another crucial element to take into account when determining your marketing budget is your target audience. Various marketing channels can be used to reach different populations, and the cost of these channels can also vary.
For example, social media marketing might be less expensive than traditional advertising tactics, therefore you might want to invest more in it if your target demographic is younger. However, if your target audience is older, you may need to spend a larger portion of your budget on more expensive direct mail or print advertising.
Marketing Goals and Objectives
Your budget should be heavily influenced by your marketing goals and objectives. You may need to spend more on public relations and advertising if you want to raise brand awareness.
You may want to concentrate more on email marketing or loyalty programs if you want to boost client loyalty. These strategies can be less costly but still quite successful.
Target Demographic
Understanding your primary consumer is the first step. Certain strategies might better grab their attention depending on variables including age, financial level, values, and behaviors.
A restaurant serving college students might prioritize influencer and social media marketing over radio and print advertisements. In the end, the target demographic and the marketing mix must coincide.
Restaurant Marketing Budget Breakdown
After you’ve reviewed the factors that can influence your marketing budget, you should consider the many marketing channels accessible to you, as well as the prices connected with each.
Social Media Marketing
One economical method of reaching a big audience is through social media marketing. In order to interact with your audience and advertising your business, entails producing and disseminating content on social media channels.
Depending on the platform you choose and the volume of material you provide, social media marketing costs can change. But, because it’s typically less costly than conventional advertising techniques, it’s an excellent choice for eateries with a tighter marketing budget.
Search Engine Optimization (SEO)
By making your restaurant’s website more search engine friendly, you may increase the likelihood that potential consumers will find you. SEO can be a costly method of improving your internet visibility, additionally it can be a difficult and time-consuming procedure.
For restaurants trying to increase their online traffic, SEO is frequently a beneficial investment, though the price can vary based on the intricacy of your website and the level of competition in your industry.
Email Marketing
Sending consumers promotional emails to keep them updated about your restaurant and to promote repeat business is known as email marketing. Email marketing is generally a cost-effective approach to keep up with your consumers and encourage repeat business, though the price can vary based on the size of your email list and the frequency of your emails.
Content Marketing
In order to draw in and keep your audience interested, content marketing entails producing and disseminating valuable information. Infographics, films, blog entries, and more may fall under this category.
Although the price of content marketing might vary based on the kind of material you create and how frequently you post, it’s frequently an affordable method of increasing audience engagement and brand exposure.
Paid Advertising
Paid advertising is the practice of spending money to advertise your restaurant on a variety of websites, social media, and search engines. Paid advertising can be a very efficient approach to reach a big audience and raise brand awareness, but the cost can vary greatly depending on the platform you use and the reach of your ads.
Public Relations
Public relations is the management of your restaurant’s reputation and relationship with the general public. Press releases, media relations, event sponsorship, and more may fall under this category.
The extent of your efforts will determine how much public relations costs, but for eateries trying to improve their reputation and draw in more business, it’s frequently a wise investment.
Ultimately, deciding on your restaurant marketing budget requires taking into account a number of variables, such as the size and location of your establishment, your target demographic, and your marketing aims and objectives. It also entails being aware of the various marketing channels that are at your disposal and the expenses related to them.
You can make sure that your marketing funds are used as efficiently as possible and that your restaurant will see tangible, quantifiable benefits by carefully weighing these variables and choosing your marketing budget.
How Can You Calculate Your Marketing Budget?
Your restaurant marketing budget can be determined in a number of ways. Let’s take a quick look at them.
Percentage of Sales Method
This is a revenue-based budgeting strategy in which a defined percentage of your predicted sales revenue is allocated to marketing. For example, you will spend $2000 on different marketing channels if you intend to make $10,000 in sales and set aside 20% (fixed) of your entire sales for marketing.
This implies that your marketing budget will be based on how well you sell. Historical sales data, industry benchmarks, and your data-driven insights into your niche market can all be used to calculate the percentage. Many small to medium-sized restaurants choose this approach since it is straightforward and user-friendly.
Goal-Based Budgeting
As the name implies, this marketing strategy bases marketing budget allocation on quantifiable goals and objectives rather than just sales income or projections. The objective task technique of budgeting is another name for it. The objective-based budgeting process consists of three parts.
For example, by the end of the next quarter, you want to increase restaurant sales by 10%. For the next twelve weeks, you may find that the restaurant must run three advertisements per week in seven local newspapers. The typical marketing budget for the restaurant would be $25,200 if each ad cost $100.
Competitive Analysis
If you want to avoid your rivals outspending you on advertising, use their advertising budget as a guide when determining your own. Competitive budgeting analysis is the term for this. Consider studying both direct competitors (eateries with similar food and pricing points) and indirect competitors (various specialty restaurants catering to the same audience).
In order to create distinctive marketing USPs for consumer acquisition, you may need to search through competition websites, social media campaigns, customer reviews, and loyalty programs. As an alternative, passive marketing strategies could be used, such as matching rival prices for important menu items or providing competitive pay to draw and keep employees.
Zero-Based Budgeting
Starting from the beginning, zero-based budgeting requires you to provide justification for each and every expense for a future time frame, such as a month or a year. Your best option for optimizing the efficiency of your restaurant marketing expenditures is to use this budgeting technique. The fundamental idea is that your marketing budget starts at zero for each expense category. You have to make a case for the expense category, explaining why the financing is needed and how much of the budget is needed. The goal of this defense is to persuade management to conduct a critical assessment of expenditures.
There are many benefits to this budgeting approach. It may result in significant cost reductions since your team is compelled to carefully examine each marketing expenditure. As the team critically assesses where resources are wasted or underutilized, it also increases process efficiency. However, conducting a thorough assessment of expenses is a strategic process that calls for cooperation from all departments.
Return on Investment (ROI)-Focused Budgeting
This strategy guarantees that your marketing budget is closely linked to attaining quantifiable outcomes and optimizing the financial return on each dollar invested. Realistic goals should be set, such as boosting sales by 10%, enhancing client retention by 20%, or cutting food expenses by 15%.
Restaurants that use this approach of budgeting consistently use a variety of tools to monitor return on investment. This could entail using inventory management software to track food expenses, evaluating metrics from consumer loyalty programs, or analyzing sales data. This budgeting technique immediately affects the restaurant’s financial performance because it is based on data-driven indicators.
How to Allocate Marketing Budget for a Restaurant?
It might be difficult to decide how much money to spend on different marketing initiatives when there are so many marketing channels to try. How much do restaurants spend on marketing?
To discover the ideal mix between your tried-and-true restaurant marketing methods and fresh concepts, you might attempt the 70/20/10 strategy.
Allocate 70% of your spending to tried-and-true, traditional marketing strategies that have previously proven successful for you. Keep 20% of your money to continue newly launched efforts that were not previously prioritized, and 10% for new ideas. (By keeping this strategy in mind, you can guarantee reliable outcomes while maintaining the freedom to experiment.)
To get you started, below is a breakdown of the restaurant marketing budget.
| Marketing Channel | Budget Allocation |
| Online Advertising | 25% |
| Print Ads | 10% |
| Social Media Marketing | 15% |
| PR and Brand Awareness | 10% |
| Email Marketing | 10% |
| Events or Sponsorships | 10% |
| Loyalty Programs | 10% |
| Video Marketing | 10% |
(Note: This serves just as a guide to assist you in creating your restaurant marketing budget. The most appropriate budget distribution may differ depending on your marketing objectives and needs.)
Step-by-Step Guide to Create Your Restaurant Marketing Budget
It can be overwhelming to create a marketing budget. However, by following a few essential steps, you can create a budget that positions your marketing for success:
Step 1: Define Your Buyer Persona
Who would be your ideal client? List all of the important details, including age, demography, hobbies, and online activity. You may better target your marketing messages through the most efficient channels by determining your buyer profile.
Step 2: Set SMART Marketing Goals
- Specific: Define your target (for example, increase online orders by 20%).
- Measurable: Determine measurements, including website traffic and conversion rates, to monitor progress.
- Attainable: Make sure your goals are challenging but doable.
- Relevant: Set marketing objectives that complement your overarching business goals.
- Time-bound: Take your commitment to meeting deadlines seriously.
Step 3: Investigate Marketing Costs
Examine several digital and conventional marketing platforms to determine how well they can help you achieve your marketing objectives. We have already covered the topic of budgeting for various forms of marketing. To further minimize expenditures for the most return on investment, think about having an expert analyze your final budget plan.
Step 4: Seasonal Marketing Factor
During the summer, winter, or other holidays, set aside some money for seasonal marketing. Having a buffer amount will help with marketing campaigns during slower times or focused specials that take advantage of seasonal ingredients.
Step 5: Select Your Budgeting Approach
Make the decision to proceed with goal-based marketing or revenue-based marketing. For the former, you would need to set aside 3–10% of your sales for marketing in order to achieve basic objectives. This budgeting method is perfect if you’re just starting out and don’t have any clear marketing objectives. However, if you have a well-defined SMART goal that you want to accomplish, use the goal-based approach.
Step 6: Track Performance, Analyze ROI, and Adapt
After your marketing initiatives are launched, keep an eye on your restaurant POS’s sales data and statistics. Use one of the two methods listed below to determine the return on investment (ROI) of your marketing campaigns:
ROI = (Net return on investment / Cost of investment) x 100%
Or
ROI = (Final value of investment – Initial value of investment) / Cost of investment x 100%
Finally, marketing ROI= (Revenue from Marketing−Marketing Expenses) /Marketing expenses) x100%
Keep an eye on your ROI on a regular basis and be prepared to modify your budget allocation in light of what is and is not working.
Tips To Adjust Restaurant Marketing Budget Based on Performance & ROI
The following tips will help you adapt your budget perfectly:
Tip #1: Keep Track of Everything Like a Hawk
What you don’t measure, you can’t improve. Pay careful attention to your marketing metrics, such as social media engagement and website traffic. To determine which channels are generating the most reservations, use technologies such as Google Analytics.
A Toast study found that restaurants that monitor key metrics had a higher chance of making money.
Additionally, you can take advantage of high-end analytics solutions like Restaurant Growth’s internal dashboard. It can assist you in monitoring every dollar spent on your marketing campaigns and calculating the ROI.
Tip #2: Do Not Be Afraid to Pivot
Prepare to reallocate your budget to the channels that are producing outcomes.
For instance, it’s appropriate to increase your newsletter efforts if your email marketing is booming but your Facebook advertisements are failing.
Tip #3: Test, Test, and Test Some More!
To find out what appeals to your audience, try A/B testing various ad wording, pictures, and targeting.
Your ROI can be significantly impacted by even minor adjustments. According to an Invesp study, A/B testing can actually raise conversions by 25%.
Tip #4: Remember to Keep Regulars in Mind
Getting new clients is crucial. However, don’t disregard your devoted customers.
A Bain & Company study found that a mere 5% improvement in client retention can boost profitability by 25% to 95%. Make use of your marketing budget to provide your loyal customers with special deals and tailored experiences.
Tip #5: Keep An Eye On Competitors
Keep an eye on the marketing initiatives of your rivals and modify your budget as necessary. If they’re putting a lot of effort into Instagram, you might want to follow suit.
However, instead of simply copying them, look for methods to set yourself apart and make a statement.
Compliance and Legal Considerations in Restaurant Marketing Budgeting
Truthful Advertising
Budgeting is just a process of allocating resources. Keep in mind that there are also legal and regulatory considerations. For example, all of your marketing statements must be accurate and not deceptive in accordance with FTC laws. Any terms and conditions pertaining to loyalty programs, discounts, or special offers must be mentioned.
Food Labeling and Claims
Additionally, any health claims about your food (such that it is heart-healthy or low-fat) must adhere to FDA labeling laws. Your menu descriptions should all accurately list the ingredients and refrain from using deceptive language.
Data Privacy Compliance in Online Marketing
On social media platforms, be sure to declare paid content if you’re pursuing influencer marketing. Additionally, if you gather consumer data for marketing, you must adhere to data protection laws such as the General Data Protection Regulation (GDPR).
Final Words
The Average Marketing Budget for a Restaurant is a strategic effort. A one-size-fits-all strategy does not exist. Some large firms may spend up to 50% of their gross profit on marketing, whereas tiny, local restaurants may only spend 3% of their profits. In this sense, you may make sure that your resources are distributed efficiently by using ROI-focused budgeting and objective-based, competitive analysis.
When using these strategies to prepare a budget, several factors may come to light. All you need to do is determine the best budgeting technique to allot dollars for your selected methods and comprehend the efficacy of various marketing channels for your business. The budget allocation table will show you how to divide your budget in the most efficient way possible. However, keep in mind that you may always adjust the allocation of your budget to meet your unique requirements in order to optimize the marketing impact of your business.
Frequently Asked Questions
What is a good marketing budget for a new restaurant?
Generally speaking, a restaurant’s marketing expenditure should be between three and six percent of total sales. This makes it possible to market your brand and draw in clients in a balanced way. When choosing your budget, take into account your target market, competitors, and particular goals.
What is a reasonable marketing budget?
A restaurant’s target market, location, and overarching objectives all affect how much money it should spend on marketing. Generally speaking, a good place to start is by dedicating 3–6% of your overall sales to marketing.
What is a good marketing budget for a small business?
It is often advised that small businesses, particularly restaurants, allocate 7-8% of their overall income to marketing. You may build your brand and get a foothold in your local market with this marginally greater percentage.
Pay attention to low-cost tactics like targeted email campaigns, Google Business Profile optimization, and social media promotion. You can change your budget and look into other marketing avenues as your company expands.
How much do fast food restaurants spend on advertising?
Large fast food franchises, like Domino’s, can spend hundreds of millions of dollars a year on advertising, but individual eateries and smaller chains will have smaller budgets.
What is a typical marketing budget for a small restaurant?
For a small restaurant, the Average Marketing Budget for a Restaurant is between three and six percent of total sales. This implies that you should spend $15,000 to $30,000 on marketing if your restaurant makes $500,000 a year.
