How to Calculate and Optimize Your Restaurant’s Customer Acquisition Cost (CAC)

As a restaurant owner, it’s easy to pour money into advertising and promotions without knowing how much it’s really costing your business. However, it’s best to understand how cost-effective your current customer acquisition efforts are before dedicating resources to it. 

Knowing how to calculate and optimize your customer acquisition cost (CAC) can help you make smarter decisions about your marketing and advertising strategies.

In this article: 

• How to calculate your restaurant customer acquisition cost (CAC)

• How to optimize your restaurant’s CAC and reduce costs

• What is a good cost per customer acquisition?

How to calculate your restaurant customer acquisition cost (CAC)

As a business owner, understanding CAC is important if you want to make informed decisions about your marketing investments. In fact, it’s one of the top restaurant metrics to track since it helps you see exactly how much you’re spending to attract each new customer. 

CAC lets you get a clearer view of how your marketing efforts impact your bottom line.

CAC formula

The formula for calculating customer acquisition cost is simple:

CAC = Total Marketing Expenses / Total New Customers

Total Marketing Expenses account for all the money your restaurant spends on acquiring customers. It includes Facebook ads, Google Ads, email campaigns, in-store promotions, and any other marketing tools you use.

For example, if you run a social media campaign or pay for online ordering integrations, all of these contribute to your overall marketing expenses.

Total New Customers refers to how many new customers your restaurant gains during a specific period because of your marketing efforts. You typically track this metric over a month or a longer campaign window, like 60 or 90 days.

Imagine you own a café, and you’ve just run a campaign to boost your online ordering. You spent $800 on Facebook ads and in-store promotions over a month.

During that same period, you gained 100 new customers.

Here’s how to calculate the CAC:

CAC = $800 / 100CAC = $8 per customer

In this example, acquiring each new customer costs your café $8. While the average Facebook CAC differs among different businesses, the ideal across all industries is below $10.

The example’s $8 CAC falls within the ideal range, which implies a cost-effective marketing campaign. Nonetheless, you must continue to monitor your CAC over time and make adjustments as needed to keep your marketing efforts profitable.

How to track first-time customers accurately

Tracking new customers is crucial to calculating your restaurant’s CAC accurately. Many restaurants use POS systems that can differentiate between new and existing customers based on payment methods or loyalty program sign-ups.

This way, you can analyze the right data and have an accurate understanding of how many new people are trying your restaurant.

For dining establishments that rely on in-person traffic, a simple way to track new customers is by asking them directly when they place an order or through digital receipts that prompt a brief survey.

You can also integrate your restaurant’s POS system with customer relationship management (CRM) software to better understand your customer base. This allows you to track customer behavior, preferences, and lifetime value, which can further inform your marketing strategies and help you optimize your customer acquisition efforts.

How to optimize your restaurant’s CAC and reduce costs

Reducing your restaurant’s CAC involves developing, testing, and improving targeted marketing campaigns. This way, you can attract the right customers at a lower cost.

Develop targeted marketing campaigns

Focusing on specific audiences can significantly lower your CAC and your overall restaurant costs.

Instead of casting a wide net with generic ads, use targeted marketing to reach the people most likely to dine at your restaurant. Having a precise approach makes sure that you’re spending your marketing dollars where they matter most.

For example, a local restaurant can use geo-targeting in its Facebook Ads or Google Ads campaigns to target potential customers in a specific geographic area. 

By focusing on people within a 5-10 mile radius of your location, you can attract more relevant customers and avoid wasting money on ads seen by people who are too far away to visit your restaurant.

For a more organic restaurant marketing strategy, you must optimize your NAP (Name, Address, Phone) across online directories and claim your Google Business Profile. Doing so helps customers find you more easily and increases the likelihood of them becoming new patrons.

Another approach is to focus on a specific customer persona, like young families or college students. If you run a burger joint near a college campus, you could create social media content and promotions tailored to students’ preferences and budgets. 

This targeted approach can lower your CAC by having your marketing efforts reach the right audience.

Test and improve marketing strategies

One of the best ways to refine your CAC is by consistently testing and adjusting your marketing strategies.

A/B testing is a powerful tool that lets you experiment with different ad formats, messaging, and targeting methods to see which ones generate the most customers at the lowest cost. 72% of companies experienced a boost in conversion rates through A/B testing.

You can test variations of your ads to determine what works best, such as comparing short-form video ads against static images or different promotions.

Regular data analysis is also key. Tracking how your ads perform over time helps you spot trends and areas for improvement. If a particular campaign leads to a high CAC, you can tweak the targeting, messaging, or platform to see if a different approach delivers better results.

One thing to remember when doing A/B testing is to roll out changes one element at a time. 

For instance, you can change the CTA button colors first to see if it improves conversions before adjusting the ad copy. This way, you can isolate the impact of that specific change and make better decisions about your marketing strategy.

Focus on organic customer acquisition

While paid marketing can give you short-term results, focusing on organic customer acquisition methods can help you establish restaurant cost controls. Social media, SEO, and word-of-mouth are powerful tools for attracting new customers without spending a fortune.

• Social Media: Building an active presence on platforms like Instagram and Facebook allows you to engage with your audience directly. You can grow your base organically when you share behind-the-scenes content and interact with your followers. For example, restaurants that encourage user-generated content (like customers posting their meals) leverage social proof while building brand loyalty without any direct ad spend.

• Word-of-Mouth: Happy customers are your best marketers. Encourage them to leave positive reviews on platforms like Google and Yelp. Word-of-mouth marketing is one of the most effective—and free—ways to acquire new customers.

• SEO (Search Engine Optimization): Optimizing your restaurant’s website for search helps people find you online. By appearing in local search results for terms like “best pizza near me” or “dine-in restaurants,” you can attract potential customers who are already searching for what you offer. This organic traffic helps lower your CAC over time as it requires no ongoing ad budget.

Ads take up a chunk of your restaurant budget, which could be invested in other areas like improving the customer experience or expanding your menu. By focusing on these organic customer acquisition strategies, you can build a sustainable customer base that costs less to acquire over time.

As your restaurant’s online presence and word-of-mouth reputation grow, you’ll be able to attract new customers more efficiently without relying solely on paid advertising.

Complement CAC optimization with customer retention efforts

While lowering your CAC is important, pairing it with customer retention can help you get even more value from your marketing efforts. In fact, acquiring a new customer can cost you 5 to 7 times more than fostering loyal diners.

Turning new customers into repeat ones reduces the need to spend more money constantly attracting new people. Instead, you can grow your business by keeping your existing customers happy.

One way to boost customer retention is by offering loyalty programs. For example, you can give customers a free meal or discount after a certain number of visits. It encourages them to come back and spend more at your restaurant without needing extra marketing. 

Plus, loyalty programs make customers feel appreciated, which increases their likelihood of returning.

You can also offer special promotions to keep customers engaged. Birthday discounts, exclusive offers for repeat customers, or “VIP” events for loyal patrons are great ways to encourage people to return to your restaurant.

Another effective strategy is personalized marketing. As you collect customer data through your POS or CRM system, you can send personalized offers based on their preferences. For instance, if a customer orders pizza often, you could offer them a special deal on their favorite pie.

Combining CAC optimization with customer retention efforts can bring in a steady flow of repeat customers, which can lower your overall marketing costs.

What is a good cost per customer acquisition?

While there isn’t a one-size-fits-all number, we can look at general benchmarks to help guide you in determining what a good CAC is for your restaurant. For the restaurant industry, the CAC can range between $27 to $180.

For fast-food restaurants, the average paid CAC is $27, while the average organic CAC is around $9. Fast casual and casual dining restaurants are in the middle ground, between $83 and $125 of paid CAC.

Lastly, fine dining establishments have the highest paid acquisition costs at nearly $180. This difference is usually due to higher menu prices, which can justify a more expensive acquisition cost because customers tend to spend more.

In fast food and fast-casual restaurants, where customer turnover is high, and meals are relatively inexpensive, businesses often aim for a lower CAC, ideally lower than $27. These restaurants rely heavily on volume and repeat business, so it’s important to keep their CAC as low as possible while still acquiring new customers.

CAC and Customer Lifetime Value (CLV)

When deciding what a good CAC is for your restaurant, remember to complement it with Customer Lifetime Value (CLV). CLV is the total revenue you can expect from a customer throughout their time dining at your restaurant.

If your CAC is higher than your CLV, you’re losing money because you’re spending more to acquire each new customer than you’ll earn from them over time. A good rule of thumb is that your CAC should be about one-third of your CLV.

Let’s say your average customer spends $50 per visit and visits your restaurant 10 times per year, making your CLV $500. To maintain a healthy CAC-to-CLV ratio, your CAC should be around $167 or less.

Maintaining this ratio means you’re making more money from each customer than you’re spending to acquire them.

Take control of your restaurant’s expenses

Knowing how to calculate and optimize your restaurant’s CAC is crucial for long-term profitability and growth. By carefully tracking how much you’re spending to attract new customers and continuously refining your marketing strategies, you can make smarter decisions that lower your expenses and improve profitability.

Reduce your overall operational costs even further with 7shifts. Our restaurant scheduling software helps prevent over or understaffing, letting you avoid wasted labor costs. 7shifts also has integrated time tracking to eliminate costly payroll errors to help you optimize your restaurant’s labor costs.