Mark ups and no-booking policies: The techniques restaurants use to make money

Why a bottle of wine in a restaurant can sometimes be five times the price of one in a supermarket

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The restaurant business is extremely cut-throat, especially in areas where there is a hotbed of foodie talent such as London.

Last year, the number of restaurants which opened in the UK capital hit a record (200) while 76 shut. After the UK voted to leave the European Union in June, there were worries the restaurant industry would be one of the worst affected. Jamie Oliver even closed six of his Jamie’s Italian chains due to the “tough market” which was opening up after the referendum, he claimed.

What are the measures restaurants take to ensure they make a profit? The Independent spoke to industry experts about some of the best secrets in the trade.

Roly Grant, the creative director of BuroCreative – a brand design studio specialising in food and drink – says what makes a successful restaurant is an institution that manages to perfectly balance a “confident, interesting offer with a team who excel at food and service”.

Roger Perowne, the founder of Morar Consulting, an insight agency which has worked with the likes of Wagamama, Pizza Express and Yo Sushi, told The Independent the two things which make a restaurant stand out is the location and commitment to different, bold concepts that have not been done before.

What sometimes angers customers are the mark-ups that restaurants clearly place on products, yet they often have to in order to guarantee a profit.

Mr Perowne says wine can be four or five times the cost of supermarket-bought wine but this is justified because of storage and service costs. Other food which is typically cheap to make also sees a huge mark-up. Pizza, for example, tends to have a gross margin of 80 per cent and pub food 65 per cent, he says.

Eateries also take measures to ensure their diner is at maximum capacity whenever possible. Sometimes they will apply discounts at certain times of day (like pre-theatre menus which are all the range in London) that state a party has to be out by a certain time.

Mr Perowne says it is also not uncommon for restaurants to not take bookings so they don’t risk no-shows or empty tables when customers are late. Other restaurants encourage diners to have a drink or coffee in the lounge afterwards in a roundabout way of politely asking them to move on.

Where restaurants often go wrong, he says, is when they do not apply basic business and marketing skills.

“This could be not putting systems in place (viewing it as ‘too’ corporate and something that larger chains do) or underestimating capital requirements as the concept matures," Mr Perowne says. “…[For example] Under-investing in the kitchen (where the magic happens), under-investing in PR and communications, [failing to] include techniques to keep the buzz going such as introducing new menu items or lacking a system of customer feedback to capture and nip operational issues that drive loyalty in the bud”.

Additionally, Mr Grant says restaurants have to increasingly compete with high rents, food costs, staff costs and turnover. This against the standard of competition and an “underestimation of what it takes to succeed” can ensure restaurants come up short.

So what do restaurants need to bear in mind going forward? Social media is becoming increasingly important for restaurants and the need to engage with it and formulate a digital strategy is something Mr Perowne says is key.

“On social media word spreads fast (both good and bad) so the need for transparency is greater than ever before,” he says. “Added to that social media is ‘always on’ and places new demands on dealing with issues and complaints too.”

Reviews are also something not to be sniffed at: “Ignore Trip Adviser at your peril! It’s what diners use to help navigate the options in a new location,” Mr Perowne warns.