Restaurant marketing budget: setting it from margin, not revenue

Aug 18
3 min read

Updated: 3 days ago

Introduction

The standard advice is to spend a percentage of revenue on marketing. In hospitality that is particularly misleading, because food and beverage margins vary enormously between concepts and the percentage rule ignores them entirely.

A budget built from margin and from what a returning customer is worth is both defensible and usually different from the conventional figure.

1. Build the restaurant marketing budget from customer value

Start with what a returning customer produces in gross profit across their relationship with you — average spend per visit, visits per year, years as a regular, multiplied by food and beverage margin.

Divide by three for a working maximum cost to acquire one. Multiply by how many additional regulars you want.

That figure is tied to your own economics rather than to a rule of thumb, and it will surprise most operators in the upward direction, because a regular is worth far more than one cover suggests.

2. Separate one-off build from ongoing spend

Two categories that behave completely differently.

Build is work that creates something lasting: costing every menu item, a redesigned menu, decent photography, the Business Profile set up properly, a review collection routine, a way to capture customer contact details.

Spend is ongoing: paid campaigns, delivery platform commissions, printed material.

Build items are cheap, mostly one-off, and they make everything else work better. Fund them first.

3. Cost the menu before spending anything

For a restaurant this is the highest-return item in the budget and it costs only time.

Until you know the contribution margin of each dish, using weighed portions and including waste, you cannot know what is worth promoting. Almost every kitchen finds a popular item earning close to nothing.

Promoting the wrong dish harder is how a busy restaurant stays unprofitable, and no advertising budget fixes it.

4. Weight the budget across the year

Hospitality demand is not even. It varies by day, by season, by local events and by school terms.

Put your known peaks and troughs on paper and weight spending accordingly: acquisition ahead of a strong season, retention offers into the quiet periods, and nothing at all during the weeks you fill anyway.

Spending evenly means overpaying when you are full and under-supporting the shifts that need help.

5. Count the delivery platform commission

For any restaurant using delivery platforms, commission is one of the largest marketing costs in the business and it rarely appears in the marketing budget.

Include it. Then compare cost per customer through that channel against your other channels on the same basis. Sometimes it compares well, particularly for acquisition. Sometimes it does not, and knowing which requires putting it in the same table as everything else.

6. Reserve something for retention specifically

Most restaurant marketing budgets are entirely acquisition. That is the expensive half.

Set aside a portion for capturing contact details, a simple loyalty mechanic, and messaging past customers about quiet shifts. These cost very little and act on people who already know you, which makes them the cheapest covers you will buy.

7. Review quarterly against four numbers

Covers on your target shifts, average spend per head, margin on main items, and the share of diners who return.

If acquisition cost is comfortably below your ceiling, increase the budget — you are buying profit. If it is above, the answer is not more money but fixing the offer, the menu or the shift you are targeting.

8. Keep a small amount for testing

Set aside a modest portion for things you have not tried, and judge it on what you learned rather than on return.

A test that establishes a channel does not work for your concept has done its job, and doing that cheaply is the point. Without a reserve, operators either never test anything or test with money they needed for something else.

Keep each test small enough that a poor result costs a slow week rather than a quarter.

Conclusion

Set the budget from the gross profit a regular produces rather than from a percentage of revenue, and split it between one-off build and ongoing spend.

Cost the menu before promoting anything, weight spending toward the periods that need it, count delivery commission as marketing cost, reserve a portion for retention, and review quarterly against four numbers.