Customer Lifetime Value (LTV)

Customer lifetime value is the total contribution-margin profit a customer generates from first visit to last. The simple formula: average visit frequency × average ticket size × contribution margin percent × expected years as a customer.

A casual restaurant might see customers visit 8 times per year, spend $35 per visit, with a 65% contribution margin, over an average 4-year relationship. LTV ≈ 8 × $35 × 0.65 × 4 = $728. A fine-dining restaurant has fewer visits but much higher ticket and longer loyalty; LTV can run several thousand dollars.

LTV is what justifies acquisition spend. The 3:1 LTV-to-CAC ratio means that an LTV of $728 supports up to roughly $240 in acquisition cost per customer — a useful ceiling when evaluating whether a paid channel makes sense.

LTV varies by customer type more than restaurants usually realize. Loyal regulars (top 10%) typically have an LTV 5-10x the average. The marketing implication is that the highest-leverage spending is on retaining and upgrading existing customers, not acquiring new ones — even though most marketing budgets go the other way.

Most restaurant marketing spend is biased toward acquisition because acquisition is visible and retention is invisible. Calculating LTV — even approximately — surfaces how much value sits in existing customers and shifts budget toward loyalty programs, retention emails, and review-based word of mouth.