Two Things Every Restaurant Needs to Succeed

Your food is good. Your service is solid. You work harder than almost anyone you know.

So why does the bank account still tell a different story?

After 22 years in the restaurant industry — and seven of those spent working directly with independent operators as a consultant and coach — I've reviewed hundreds of P&Ls and had thousands of conversations with restaurant owners across the country.

The restaurants that struggle all have something in common. So do the restaurants that thrive.

Here's what separates them: two things. One on the operations side. One on the marketing side.

Miss either one and the business stays stuck. Get both right and everything changes.

Why "Good Food and Good Service" Isn't Enough

Let's get one thing out of the way first.

Good food and good service are not the answer. They're the entry fee.

The market is too crowded, too competitive, and too unforgiving for average to be a strategy. I'm going to assume your food is good. I'm going to assume your team cares. That's a given.

What I'm talking about is something more foundational. The layer underneath the menu and the hospitality — the architecture of a profitable, sustainable restaurant business.

Thing #1: A Clear Path to Profitability

Here's a number that stops most restaurant owners cold when they hear it.

Roughly 80% of restaurants in this country operate under a 5% profit margin.

Not five percent profit. Under five percent.

Think about what that means in practice. If you're doing $100,000 a month in revenue and netting 5%, that's $5,000. One broken refrigerator. One slow week. One unexpected repair. And the entire month is gone.

This is why so many operators feel like they're constantly running on empty — even when the dining room is full.

The problem usually isn't sales. It's that there is no clear path to profitability.

The 30-30-20 Rule

When I work with coaching clients, we start here. I call it the 30-30-20 rule, and it's a framework for how to think about every dollar your restaurant spends.

Three buckets. Three targets.

• Cost of Goods Sold (COGS): 30% of revenue
• Labor: 30% of revenue
• Everything else (rent, utilities, insurance, etc.): 20% of revenue

Thirty plus thirty plus twenty equals eighty. Which leaves twenty percent as profit.

That's not a fantasy number. That's achievable — for an independent restaurant doing $1M to $3M in annual revenue — when you build your operations around it deliberately.

The key insight here is that every expense should be tethered to a revenue number, not treated as a fixed cost that's just "what it costs to operate." When revenue goes up, you can spend more. When it goes down, costs must come down too.

Every month, that process starts with a pro forma — a forward-looking budget that projects revenue and establishes spending targets across all three buckets before the month begins. Most restaurants never do this. They wait until the P&L arrives to find out how they did. That's managing backwards.

Profitable restaurants plan forward.

Thing #2: A Real Marketing Strategy

The second thing every restaurant needs is a marketing strategy — not to be confused with a social media calendar.

When I ask restaurant owners about their marketing, I get one of two answers. Either they start telling me about Instagram, or they say they can't afford marketing because they're "just a small restaurant."

Both answers miss the point.

Marketing isn't Instagram. Instagram is one tool available to the marketer. And every restaurant is already marketing — whether they know it or not. The question is whether you're doing it intentionally.

Here's the definition I've used since episode one of this podcast. Marketing is the answer to three questions:

• What is the product?
• Who is it for?
• How do we reach them?

The "who" sits at the center of all of it. You cannot remove the audience from the equation. And most struggling restaurants have never taken the time to clearly define theirs.

There are two ways to approach marketing. You can create a restaurant you're passionate about and then spend years trying to find the right audience. Or you can look at your market first — your neighborhood, your city — identify what people actually need, and build a restaurant that fills that need.

Most restaurants do the first one. The most successful ones do the second.

Marketing done right isn't an expense. It's the engine that drives consistent, predictable traffic — which is what makes everything else in the business sustainable.

When Both Things Work Together

Here's what changes when a restaurant finally has both pieces locked in:

• Sales increase because marketing is bringing the right guests in the door consistently
• Costs stay under control because expenses are tied to real revenue targets
• Cash flow becomes predictable because there's a plan — not a hope
• Owners stop living month to month and start running the business like a business

It stops feeling like survival. It starts feeling like control.

Is This Your Restaurant?

If you're working 60-plus hours a week, the dining room is full, and yet there's nothing left at the end of the month — these are the two things worth fixing first.

This is exactly the kind of work we do inside the P3 Mastermind — with independent restaurant owners doing $1M to $3M in annual revenue who are ready to stop guessing and start building a restaurant that actually works.

→ Learn more about the P3 Mastermind

What's the bigger gap in your restaurant right now — profitability systems or marketing clarity? Drop it in the comments — I read every one.

Frequently Asked Questions

What are the two things every restaurant needs to succeed?

According to Chip Klose, every restaurant needs a clear path to profitability and a consistent marketing strategy. The first is operational — understanding your numbers and building systems to protect margins. The second is strategic — knowing who your restaurant is for and how to reach them consistently.

What is the 30-30-20 rule for restaurants?

The 30-30-20 rule is a profitability framework: 30% of revenue goes to Cost of Goods Sold, 30% to total labor, and 20% to all other operating expenses. This leaves a target profit margin of 20% — a number that is achievable for independent restaurants when expenses are tied to revenue targets.

Why do restaurants fail even when they're busy?

Busy restaurants fail when they have no path to profitability. High revenue without cost discipline still produces thin or negative margins. Without a budget that ties expenses to revenue, operators discover the problem only after the fact — when it's often too late to course correct.

What is a pro forma in restaurants?

A pro forma is a forward-looking budget — a projection of anticipated revenue and a spending target for each expense category before the period begins. It allows operators to manage proactively rather than reactively.

Is social media the same as restaurant marketing?

No. Social media is one tool available to the marketer, not marketing itself. Marketing is the strategic process of identifying who your restaurant is for, what they need, and how to reach them consistently. Social media may be part of that — but it is not the strategy.