Consumer (4 of 6)

Restaurants and food service

About 8 minutes to read in full, or 1 minute for the short version belowFacts checked 30 September 2026

In one minute

Restaurants, cafes, fast food chains and caterers turn ingredients and staff time into meals, served at the table, at the counter or delivered.

The big idea: One restaurant is the unit. Its sales are capped by seats, table turns and kitchen speed, and its profit depends on keeping prime cost (food plus labour, usually 55 to 65 percent of sales) under control. Before anything else, find out who owns the restaurant: the brand, a franchisee or a master franchisee, because the same brand has very different economics depending on who carries the costs.

One unit, in numbers: One casual dining restaurant in Dubai for a year: AED 12.1 million comes in, and AED 2.38 million (20%) is left after its own costs.What is left is the unit's contribution, before the costs of the whole company. See the worked example
Typical margin: 10 to 20 percent at restaurant level (the best chains about 25 percent); about 16 percent operating margin for US-listed chainsRoughly how much of every 100 of sales (or income) is left as profit after the running costs. More on margin
Capital intensity: MediumA fair amount of money is tied up, in things like stores, stock or equipment. More on capital intensity
The number to watch: Same-store sales growthSales growth in restaurants open in both periods, split into traffic (guests) and average check.

Ask this first in a case

Who owns and runs the restaurants: the brand, franchisees or a master franchisee?

Words used above (5)

Prime cost:: Food and packaging cost plus labour cost, usually shown as a share of sales.
Table turns:: Covers divided by seats: how many times each seat is used in a service period.
Average check:: The average amount spent per transaction or per guest.
Same-store sales:: Sales growth in restaurants open in both periods; the restaurant version of like-for-like.
Franchisor and franchisee:: The brand owner, and the local owner who pays to run a restaurant under that brand.

The industry's other words are explained in Words to know (13).

On this page (17 sections)

How money is made

Company-operated restaurants keep all sales and carry all costs.
Franchisors earn an upfront fee, an ongoing royalty (a percentage of sales) and marketing fund payments; some, like McDonald's, also own or lease the property and collect rent.
Master franchisees hold the rights for a whole country or region and open or sub-franchise restaurants (Americana for KFC and Pizza Hut in the Middle East, Jubilant FoodWorks for Domino's in India).
Delivery adds sales without seats, through the brand's own app or through aggregators that charge a commission.
Contract caterers earn fees for running canteens in offices, schools and hospitals under multi-year contracts.
High-margin drinks, sides and desserts lift the average check.

Worked example: one unit

Unit economics means the money in and out for one unit of the business. Start from the revenue, take away the unit's own costs, and what is left is its contribution. More on unit economics

The unit: One casual dining restaurant in Dubai for a year (80 seats, 3.5 turns a day, AED 120 per guest, 360 days), in AED thousands. Illustrative, rounded figures.
Line	Amountin AED thousands	ShareShare of revenue
Sales: 280 guests a day x AED 120 x 360 days	AED 12,096	100%
Minus Food and drink (30 percent of sales)	AED 3,629	30%
Minus Labour (28 percent of sales)	AED 3,387	28%
Minus Rent	AED 1,200	9.9%
Minus Other costs: energy, marketing, card fees, repairs	AED 1,500	12%
What is left (contribution)	AED 2,380	20%

Check: AED 12,096 minus AED 9,716 of costs leaves AED 2,380 (in AED thousands).

So what: The restaurant keeps about AED 2.4 million, close to 20 percent of sales, with prime cost at 58 percent. If dinner turns fall from 2 to 1.5, profit roughly halves (to about AED 1.2 million), because staff and rent do not fall with guests, so filling seats at peak times is the lever that moves it most, followed by prime cost.

Key measures(9)

Key measures (also called KPIs, key performance indicators) are the numbers people in this industry track. Ask for the first one or two early in a case.

Same-store sales growth
Sales growth in restaurants open in both periods, split into traffic (guests) and average check.
Typical: Chipotle: minus 1.7 percent in 2025, from fewer transactions[2]
Average unit volume (AUV)
Average yearly sales per restaurant. Glossary: Average unit volume (AUV)
Typical: Chipotle: about USD 3.1 million in 2025[2]
Prime cost percentage
Food plus labour cost, divided by sales: the first number a restaurant operator checks.
Typical: About 55 to 65 percent of sales
Restaurant-level margin
Profit of one restaurant before head office costs, depreciation and royalties.
Typical: About 10 to 20 percent for quick service; Chipotle reached 25.4 percent in 2025[2]
Table turns
How many times each seat is used in a service period: covers (guests served) divided by seats. Glossary: Table turns
Average check
Sales divided by transactions or by guests.
Speed of service
For drive-throughs, cars served per hour at peak; the slowest step sets the limit.
Digital and delivery mix
The share of sales ordered through apps and delivery platforms.
Typical: Chipotle: digital orders 36.7 percent of food and beverage revenue in 2025[2]
Share of restaurants franchised
How much of the system is run by franchisees rather than the brand.
Typical: McDonald's: about 95 percent of 45,356 restaurants at the end of 2025[3]

First questions to ask

When a case lands in this industry, these questions get you to the numbers that matter.

Who owns and runs the restaurants: the brand, franchisees or a master franchisee?
Did same-store sales move because of fewer guests (traffic) or a lower average check?
What is prime cost (food plus labour) as a share of sales, and how has it moved?
What share of sales comes through delivery platforms, and at what commission?
At peak hours, are we limited by seats, the kitchen or the drive-through?

Value chain: where the margin sits

The value chain is the steps a product or service passes through, from the first supplier to the customer. Each step below shows how much of the value it keeps. More on value chains

Step 1: Farming and food processing
Thin margin
Farmers, meat, dairy and bakery processors
Step 2: Food distribution to restaurants
Thin margin
Food service distributors and chain supply companies that deliver to each restaurant several times a week
Step 3: Brand owner and franchisor
Fat margin
McDonald's, Yum! Brands (KFC, Pizza Hut, Taco Bell), Restaurant Brands International
Earns royalties, fees and sometimes rent on franchisees' sales without carrying most restaurant costs. McDonald's operating margin was about 46 percent in 2025.
Step 4: Restaurant operator: company, franchisee or master franchisee
Medium margin
Franchisees, master franchisees such as Americana Restaurants and Jubilant FoodWorks, independent restaurants
Restaurant-level margin of about 10 to 20 percent before head office, depreciation and royalties; strong chains reach about 25 percent.
Step 5: Delivery platforms and riders
Margin varies
talabat, Zomato, Swiggy, DoorDash, Deliveroo, Uber Eats, Grab
Charge the restaurant a commission on each order (25 percent in the lesson's illustrative example).

Profit pool: who keeps the money

Where in the value chain the profit ends up, which is often not where most of the sales are. More on profit pools

The fattest profit sits with brand owners who franchise: they collect royalties, fees and sometimes rent on system sales while franchisees carry the restaurants' costs (McDonald's earned an operating margin of about 46 percent in 2025). Operators live on restaurant-level margins of about 10 to 20 percent, squeezed by food and wage costs. As delivery grows, part of the restaurant's margin moves to the delivery platform through its commission.

Cost structure(5)

The main costs, each as a share of revenue (the money from sales).

Food and packaging: 28 to 33 percent
Labour: wages, benefits, staff meals: 25 to 32 percent
Other operating costs: energy, marketing, card fees, repairs, delivery commissions: 10 to 15 percent
Occupancy: rent and service charges (the best chains can be lower: Chipotle about 5 percent in 2025): 6 to 10 percent
Royalty and marketing fund (franchisees only): A set share of sales, for example 5 percent royalty plus 4 percent marketing fund in the lesson example

Benchmarks(7)

Typical figures for the industry, to check a client's numbers against.

Operating margin, US-listed restaurant companies: About 15.8 percent[1]The average includes asset-light franchisors, whose margins are far above those of restaurant operators.
Chipotle costs as a share of revenue, 2025: Food, drink and packaging 29.6 percent; labour 25.1 percent; occupancy 5.2 percent; other 14.7 percent[2]
Chipotle restaurant-level margin, 2025: 25.4 percent, down from 26.7 percent in 2024[2]
McDonald's, 2025: Revenue about USD 26.9 billion, operating margin about 46 percent; franchised restaurants gave about 90 percent of its restaurant margin dollars[3]
Americana Restaurants, 2025: Revenue about USD 2.5 billion from about 2,700 restaurants[4]
Jubilant FoodWorks, FY26: Consolidated revenue about INR 9,513 crore[5]
Jollibee Foods system-wide sales, 2025: About PHP 455 billion, up 16.6 percent, with a record 1,126 new stores[6]

Typical cases(8)

Case prompts you might hear in this industry.

A pizza chain in India has falling margins even though orders are up. What is happening?
A US burger brand wants to enter Saudi Arabia. Should it run restaurants itself or use a master franchise partner?
A casual dining chain in the UK is losing money. Which restaurants should it keep?
A delivery platform wants to raise its commission to restaurants by 3 points. What happens?
How many drive-through lanes should a new restaurant have?
A franchisor's system sales grew 10 percent but its franchisees are unhappy. Why does that matter, and what should it do?
Should a contract caterer bid a lower price to win a five-year hospital catering contract?
How many coffee shops can Singapore support?

Common traps(5)

Mistakes candidates make in this industry, and what to do instead.

Counting system sales as the franchisor's revenue. Instead, remember the franchisor earns royalties, fees and sometimes rent, a small percentage of those sales.
Treating labour as fully variable. Instead, remember that most staff hours and rent stay the same when guests fall, so profit drops faster than sales.
Celebrating delivery growth without the commission. Instead, compare what a delivery order contributes with a dine-in order.
Adding guests without checking that the kitchen can cook for them at peak. Instead, find the slowest step (often the grill or fryer).
Opening new restaurants so close together that they take each other's guests. Instead, estimate net new sales for the area.

What changed, 2024 to 2026(6)

Recent changes a case could turn on.

Delivery platforms consolidated: DoorDash completed its purchase of Deliveroo on 2 October 2025, giving it more bargaining power with restaurants in Europe and the Gulf.[7]
Prosus completed its offer for Just Eat Takeaway.com in October 2025, so Europe's largest delivery apps now sit inside larger global groups.[8]
Regulators watch platforms closely: in 2024 the investigation arm of India's competition regulator (CCI) reportedly found that Zomato and Swiggy used exclusivity deals and price rules that harmed competition. That report is not a final ruling, and no final order had been issued by September 2026.[9]
Labour costs rose: California set a USD 20 an hour minimum wage for fast food workers at large chains from 1 April 2024, pushing chains toward ordering kiosks, apps and simpler menus.[10]
Guest traffic softened in the US: Chipotle's comparable sales fell 1.7 percent in 2025 because of fewer transactions, so value menus and traffic became case topics.[2]
Asian chains expanded fast: Jollibee opened a record 1,126 stores in 2025 and grew system-wide sales 16.6 percent, with international system-wide sales up 27 percent.[6]

Players by region(6)

Well-known companies in each region. You do not need to learn them by heart; they help you picture the market.

Global: McDonald's
Yum! Brands (KFC, Pizza Hut, Taco Bell)
Starbucks
Restaurant Brands International (Burger King, Tim Hortons)
Domino's
Compass Group (UK, contract catering)
United States: McDonald's
Chipotle (fast casual, about 4,050 restaurants, almost all run by the company itself)
Darden (Olive Garden, casual dining)
DoorDash and Uber Eats (delivery)
Europe: McDonald's and Burger King franchisees
Compass Group and Sodexo (contract catering)
Just Eat Takeaway.com (owned by Prosus since October 2025)
Deliveroo (owned by DoorDash since October 2025)
Glovo
Middle East: Americana Restaurants (KFC, Pizza Hut and other brands across the Middle East and North Africa)
Alshaya Group (Kuwait, franchise operator of many international brands)
talabat (delivery, listed in Dubai in December 2024)
Careem and Noon Food
India: Jubilant FoodWorks (Domino's)
Devyani International (KFC and Pizza Hut franchisee)
Westlife Foodworld (McDonald's in west and south India)
Zomato (Eternal) and Swiggy (delivery)
Southeast Asia: Jollibee Foods (Philippines; also owns Highlands Coffee and Mang Inasal)
Grab (GrabFood delivery)
foodpanda (delivery)
Global chains run by local franchisees

Words to know(13)

Linked words have a fuller entry in the glossary.

Prime cost (glossary entry): Food and packaging cost plus labour cost, usually shown as a share of sales.
Cover (glossary entry): One guest served.
Table turns (glossary entry): Covers divided by seats: how many times each seat is used in a service period.
Average check: The average amount spent per transaction or per guest.
AUV (average unit volume) (glossary entry): Average yearly sales per restaurant.
Same-store sales (glossary entry): Sales growth in restaurants open in both periods; the restaurant version of like-for-like.
Franchisor and franchisee: The brand owner, and the local owner who pays to run a restaurant under that brand.
Royalty: An ongoing fee, a percentage of sales, that a franchisee pays the brand.
Master franchise (glossary entry): The right to run and grow a brand across a whole country or region.
Delivery aggregator (glossary entry): An app that lists many restaurants, sends riders and charges a commission.
QSR (quick service restaurant): Fast food with counter or drive-through service and a short menu.
Cloud kitchen: A kitchen with no dining room that cooks only for delivery.
System-wide sales: Sales of all restaurants under a brand, including those run by franchisees; the brand itself earns only part of them.

Business model patterns

The ways of making money this industry follows. Spot the pattern in a new industry and you already know the first questions to ask.

Sources(11)

Facts checked on 30 September 2026. Worked examples are illustrative, shaped by these sources rather than one company's figures.

Go deeper and practise

Go deeper

The full lessons behind this brief, with sources and worked cases.

Practise it

Same pattern elsewhere

Industries that make money in a similar way. What you learned here carries over.