Restaurant Revenue Management

Abstract

In principle, restaurant operators should be able to apply the time-based philosophy of revenue management to restaurant meals. To do so, however, requires a revision in the way most restaurateurs traditionally have viewed sales. Most restaurants track item contribution margin, sales per server, revenue per day part, or similar operating ratios. A different type of measure, revenue per available seat-hour, integrates the duration of the meal as a factor in the revenue calculation. Certain elements of current-day restaurant practice, such as differential pricing (e.g., early bird specials, AARP discounts), promoting special events (such as wine tastings on off nights), and managing table turnover carry the seeds of revenue management, but few restaurants have established the necessary strategic approach to assemble those tactics into a coherent revenue-management strategy. This article seeks only to establish a framework for such a strategy, and not to set a practical road map for its execution.