Recently, I interviewed 100+ food and beverage restaurant owners to see which types of food businesses are actually making money and what isn’t.
It gave me a lot of insight into how people invest and the type of service that is being offered.
From the interviews, I was able to nail down the top five most profitable food businesses.
A typical food and beverage shop’s margins range from 5% to 10%. That is very, very slim margins.
The five food businesses that are most profitable all range from 20% to 35% margins. We’re talking about 20% to 35% margins take-home – which is incredible.
All right, let’s dive right in.
1.) Bubble Tea Shop
The number one most profitable food and beverage business is a bubble tea shop.
It’s the most profitable because the cost of goods sold (COGS) is relatively low. It ranges from 10% to 15%.
The items are also super easy to make and it is relatively simple to keep the quality consistent. All you have to do is just follow the formula and recipe.
Once you have all the powders and the syrup, you’re good to go.
Lastly, training staff is super easy because bubble tea doesn’t require any special skills (unlike cooking) to make and only require minimal service talent.
Some of the pros of operating a bubble tea shop is that it has high demand. Nowadays, everyone is drinking bubble tea and if you do not know what bubble tea is you definitely are missing out.
The second thing is the high turnover rate. You don’t need a big space to do a lot of volume. People tend to grab their bubble tea and go. That why it is such an attractive business model.
It doesn’t require a lot of investment. All the equipment is actually very affordable.
The fourth thing is quality control. It doesn’t require a very high skill to be able to make the product good because it’s all in the formula. That’s what makes this product and this business model so attractive.
For 720 Sweets, we actually started selling bubble tea two years ago because we saw how profitable it is and the demand it has.
Now, the con of running this business is that the average ticket price relatively low. This means you need a lot of volume for you to be profitable.
It is also very competitive. I’m not sure about you, but in Vancouver there are more bubble tea shops than 7-Eleven’s and Starbucks. Going down a block you’re going to see at least five of them. It is because it is such a profitable business idea out there.
I have a few friends who own bubble tea shops, and a lot of them actually surpass seven figures selling bubble tea.
We’re talking about peak times – more than $200,000 per month. That crazy amount of volume and demand was the reason why 720 Sweets began selling bubble tea too. Our franchisees love us providing this as well.
2.) Ice Cream Shop
The second most profitable food and beverage business out there is an ice cream shop.
Luckily enough, our 720 Sweets, our dessert chain, is in the forefront of this as well. This is the reason why we’ve expanded so rapidly.
The cost of goods sold (COGS), once again, is relatively low in comparison to a full-service restaurant.We’re talking about around 20% to 25% in cost of goods sold (COGS).
The quality control is definitely a pro because when you make these things in batches, it becomes a formula. Basically, you just need to follow the recipe and create mix A, mix B, mix C, and out comes a product. This means it doesn’t require highly skilled labor and talent to create the product.
And who doesn’t like ice cream? Everyone loves ice cream and the volume you potentially go through is crazy during the summertime.
Now, some of the cons of running an ice cream shop is that the equipment is a little bit higher in cost, seasonality is a problem and the low average ticket cost. So just like bubble tea shops, you’ll need a lot of volume.
The reason why 720 Sweets was able to do moderately well is because, knowing the fact that seasonality would be a problem, we introduced bubble tea and taiyaki in our menu. This allowed us to lift our average ticket cost.
People don’t only come in for dessert. They can also can come in for a light lunch or a light dinner. We created taiyaki sandwiches, which is a croissant sandwich that people love, which helped us increase our average ticket cost and tackled the seasonality problem.
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3.) Ramen Shop
The third most profitable food and beverage business idea is having a ramen joint.
Ramen is amazing when it comes to profitability. The cost of goods sold range from 15% to 20% and there is a high demand for it – people love ramen.
The average ticket cost is a lot higher compared to a bubble tea or ice cream. It can be lifted even more if you have alcohol available and set menus like a bowl of ramen and a plate of gyoza.
Although ramen isn’t as simple to make as bubble tea or scooping icecream, it only requires medium-skilled labor. A full-on trained chef isn’t required since a lot of the processes are actually preset.
Best part about a ramen business? The super-quick turnover.
Not only is ramen quite fast to make, but it is also fast to eat. In Japan, ramen is meant to be a quick meal, where you’re supposed to eat and slurp the noodles right away.
I have a friend who is in the ramen joint business. His place is only a thousand square feet and he makes more than $2 million dollars in revenue. It is mind-blowing.
It is crazy how much volume they do because of how high the turnover is.
On the flip side, the investment is a lot higher compared to a bubble tea or ice cream shop. You’ll need to consider more expensive equipment, ingredients, and number of staff.
For a bubble tea and ice cream shop, there are cases where you only need 1 or 2 staff on site. A ramen shop needs more on a regular basis for it to run.
And because of how popular ramen is, the competition is quite fierce. You’ll see many of the big names from Japan set up shop overseas. You’ll have to consider how you’re going to be able to compete with them.
4.) Pasta Shop
The fourth type of super-profitable food and beverage ideas is having a pasta joint.
After interviewing more than hundreds of food and beverage owners, F&B shops that specialize in pasta always sits near the top in terms of profitability because of how a staple this item is. Just like ramen, people love pasta, and the COGS is incredibly low because they’re just mixing flour and water.
We are talking around 15% to 20% cost of goods sold, high demand, average ticket cost is definitely a lot higher than bubble tea and ice cream.
The amount of investment needed to open a pasta joint is higher when it comes down to it. You’ll need a full-on kitchen and higher-skilled labour to open up a pasta place.
5.) Pizza Shop
The final most profitable business idea in 2019 is having a pizza shop.
This has always been super profitable because you’re basically mixing dough and water. You’re talking about maybe 10% to 15% in cost of goods sold (COGS).
Now, we’re not talking about those $1 pizza spots. But your COGS will be higher depending on what type of pizza you serve. Some people might have arugula and have different types of really upscale meat so, for those joints, their cost of goods sold is definitely higher.
When it comes to pizza, the skill required to make pizza is lower than a full-on restaurant as well. If your shop is more grab n’ go and cafeteria-style, you can also avoid having to hire extra staff.
On the con side, the investment for having a pizza shop is definitely a lot higher as well.
So there you go, the top five most profitable food and beverage businesses in 2019. I know I’ve focused a lot on the cost of goods sold but because of the fact that when it comes to running a food and beverage business, the margins are really determined by the COGS, by your labour, and rent.
So if you can control any of these to a minimum, that’s where upside comes from.
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