The size of a brick-and-mortar location, often referred to simply as “square footage,” is a key factor in the success of a business. This line item makes up a considerable percentage of your fixed costs, ultimately impacting your bottom line.
What Is Sales per Square Foot?
The dollar value of sales per square foot is often used as a measure of success in the restaurant industry. It simply implies the average revenue earned for every square foot of sales space. It is used to measure the efficiency of a store’s management in creating revenues given the amount of sales space available to them.
To calculate sales per square foot, divide annual sales by the total interior square footage of the restaurant, including kitchen, dining area, restrooms, etc. This is usually equal to the net rentable square feet in a leased space.
Why Does Sales per Square Foot Matter?
In most cases, full-service restaurants that don’t generate at least $150 of sales per square foot have very little chance of generating a profit. For example, a 4,000-square-foot restaurant with annual sales of anything less than $600,000 would find it very difficult to avoid losing money. This works out to $50,000 in monthly and $12,000 in weekly sales.
Limited-service restaurants that generate any less than $200 of sales per square foot have little chance of averting an operating loss. Industry averages reveal that limited-service restaurants tend to have slightly different unit economics than their full-service counterparts. Higher occupancy costs (on a per-square-foot basis) and lower check averages are two of the primary reasons for this difference.
At sales levels of $150 to $250 per square foot (full-service) and $200 to $300 (limited-service), restaurants with effective cost controls may begin to approach break-even, with some well-managed operations able to achieve a net income of up to 5 percent of sales.
At sales levels of $250 to $325 per square foot (full-service) and $300 to $400 (limited-service), restaurants may see moderate profits, which are defined as 5 percent to 10 percent net income (before income taxes) as a percentage of total sales.
Good News for Fast-Casual Restaurants
Top fast-casual franchising restaurants outperform restaurants in other sectors with an average of $505 per square foot. This is great news for an inexpensive burger franchise like Wayback Burgers, where the buy-in costs are relatively low, and the restaurant sizes are reasonable.
With a Wayback Burgers franchise, you can expect the initial investment to hover somewhere between $209,000 and $524,500, making it more accessible to entrepreneurs looking for the opportunity to start their own fast-casual burger franchise for well under $1 million. For investors with access to more capital, a lower investment level means the opportunity to build multiple locations over a shorter period of time.
The restaurants themselves have a small footprint — average traditional Wayback restaurants are between 1,600 and 1,800 square feet — in contrast to the average McDonald’s or Burger King franchise (traditional locations for both are approximately 4,000 square feet), which means costs associated with real estate, buildout, and equipment are less.
By keeping the costs low on the front end, Wayback Burgers is able to provide its franchise partners with a foundation upon which they can build a thriving and prosperous business.
Wayback Burgers was listed as one of the Top 10 Fast Casual Restaurant Franchises for 2019. If you are looking to invest in a new restaurant, but aren’t sure where to start, Wayback Burgers hits all the benchmarks for an inexpensive burger franchise. As a fast-casual dining concept, Wayback Burgers offers a most accessible point of entry and opportunity for growth.