Essential Key Performance Indicators Every Restaurant Should Track

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Introduction

Running a successful restaurant is more than just offering delicious food; it requires a deep understanding of key performance indicators (KPIs) that drive business success. KPIs provide a measurable way to evaluate various elements of a restaurant’s operations, from financial health to customer satisfaction. This comprehensive blog post dives into the essential KPIs for restaurants, covering revenue and profitability metrics, operational and performance metrics, customer and guest metrics, and technology and digital metrics. By mastering these KPIs, restaurant owners and managers can make well-informed decisions, optimize operations, and provide an exceptional dining experience.

Revenue and profitability metrics

1. Gross profit margin

Gross profit margin is a critical metric that measures the percentage of revenue that exceeds the cost of goods sold (COGS). This KPI helps restaurants understand how efficiently they are managing their ingredient and food costs.

How to calculate gross profit margin

To calculate gross profit margin, subtract the COGS from total revenue, then divide by total revenue and multiply by 100.

Formula: (Total Revenue – COGS) / Total Revenue * 100.

2. Net profit margin

Net profit margin shows the percentage of revenue that remains as profit after all operating expenses, taxes, and interest have been deducted. This metric indicates the overall profitability of the restaurant.

How to calculate net profit margin

To calculate net profit margin, subtract total expenses from total revenue, divide by total revenue, and multiply by 100.

Formula: (Total Revenue – Total Expenses) / Total Revenue * 100.

3. Average covers

Average covers refer to the number of dining guests a restaurant serves over a specific period. This KPI helps in measuring the restaurant’s capacity utilization and customer turnover.

How to calculate average covers

To calculate average covers, divide the total number of guests by the number of operating days in the period.

Formula: Total Number of Guests / Number of Operating Days.

4. Cost of goods sold (COGS)

COGS is the total cost of ingredients and raw materials used to create the food and beverages sold by the restaurant. Managing COGS is essential for maintaining profitability.

How to calculate COGS

To calculate COGS, add the beginning inventory to purchases made during the period and subtract the ending inventory.

Formula: Beginning Inventory + Purchases – Ending Inventory.

5. Food cost percentage

Food cost percentage measures the relationship between a restaurant’s food cost and its revenue. A low food cost percentage indicates efficient food management.

How to calculate food cost percentage

To calculate food cost percentage, divide the total food cost by total sales and multiply by 100.

Formula: (Total Food Cost / Total Sales) * 100.

6. Cash flow

Cash flow is the net amount of cash being transferred into and out of the restaurant due to operations, financing, and investing activities. Positive cash flow is vital for the restaurant’s sustainability.

How to calculate cash flow

Cash flow can be calculated by adding net income, depreciation, and changes in working capital.

Formula: Net Income + Depreciation + Changes in Working Capital.

7. Prime costs

Prime costs combine the total cost of goods sold and labor costs. This KPI is critical as it directly impacts the restaurant’s profitability.

How to calculate prime costs

To calculate prime costs, add the cost of goods sold to total labor costs.

Formula: COGS + Total Labor Costs.

8. Average check size

Average check size is the average amount of money spent per guest at the restaurant. This metric helps in understanding customer spending behavior.

How to calculate average check size

To calculate average check size, divide the total sales by the number of covers.

Formula: Total Sales / Number of Covers.

9. Break-even point

The break-even point is the point at which total revenue equals total costs, meaning the restaurant is neither making a profit nor a loss. It is a crucial metric for financial planning.

How to calculate break-even point

To calculate the break-even point, divide the total fixed costs by the contribution margin per unit.

Formula: Total Fixed Costs / (Sales Price per Unit – Variable Cost per Unit).

Operational and performance metrics

10. Revenue per available seat hour (RevPASH)

RevPASH is a performance metric that measures revenue generated per available seat hour. It helps in assessing the efficiency of seat utilization.

How to calculate RevPASH

To calculate RevPASH, divide the total revenue by the number of seat hours.

Formula: Total Revenue / (Number of Seats * Operating Hours).

11. Turn time or table turnover

Table turnover measures how quickly tables are turned over from one set of diners to the next. Faster turnover points to more efficient service and higher revenue potential.

How to calculate table turnover

To calculate table turnover, divide the number of guests by the number of tables.

Formula: Number of Guests / Number of Tables.

12. Inventory turnover ratio

Inventory turnover ratio indicates how often inventory is used and replaced over a period. High inventory turnover suggests efficient inventory management.

How to calculate inventory turnover ratio

To calculate inventory turnover ratio, divide COGS by average inventory.

Formula: COGS / Average Inventory.

13. Total sales by server

Total sales by server help measure individual server performance. It is useful for identifying top performers and those who may need additional training.

How to calculate total sales by server

To calculate total sales by server, simply track the sales each server generates during their shifts.

14. Food waste

Food waste measures the amount of food that is purchased but not used or sold. Reducing food waste can lead to cost savings and improved profitability.

How to calculate food waste

To calculate food waste, track all wasted food items and their costs over a period.

Customer and guest metrics

15. Foot traffic or guest count

Foot traffic or guest count indicates the number of people who visit the restaurant within a specific time frame. It helps in understanding peak times and planning staffing.

How to calculate foot traffic or guest count

To calculate foot traffic, simply count the number of guests entering the restaurant during the period.

16. Customer satisfaction score (CSAT)

CSAT measures customers’ satisfaction with their dining experience. High CSAT scores can indicate customer loyalty and potential repeat business.

How to calculate CSAT

To calculate CSAT, survey customers and use a rating scale, then average the scores.

Formula: (Sum of Customer Scores / Total Number of Responses) * 100.

17. Walk-ins vs. reservations

This metric compares the number of customers who walk into the restaurant without a reservation to those who book in advance. It helps with staffing and inventory planning.

How to calculate walk-ins vs reservations

To calculate this metric, track the number of walk-ins and reservations over a period.

18. No-shows

No-shows refer to guests who make a reservation but do not turn up. High no-show rates can lead to lost revenue and require measures like reservation confirmations and deposits.

How to calculate no-shows

To calculate no-show rates, divide the number of no-shows by the total number of reservations.

Formula: (Number of No-Shows / Total Reservations) * 100.

19. Cancellation rate

Cancellation rate measures the number of reservations canceled over a period. Understanding this metric can help in better managing bookings and table availability.

How to calculate cancellation rate

To calculate the cancellation rate, divide the number of cancellations by the total number of reservations.

Formula: (Number of Cancellations / Total Reservations) * 100.

Technology and digital metrics

20. Online reservation rate

Online reservation rate measures the percentage of reservations made online. Higher rates can indicate the effectiveness of online booking tools and digital marketing efforts.

How to calculate the reservation rate

To calculate the online reservation rate, divide the number of online reservations by the total number of reservations.

Formula: (Online Reservations / Total Reservations) * 100.

21. Sales from online ordering

Sales from online ordering track the revenue generated through online orders. This metric is increasingly important with the rise of food delivery and takeaway services.

How to calculate sales from online ordering

To calculate sales from online ordering, sum the revenue generated from online orders over a period.

22. Online ratings and reviews

Online ratings and reviews reflect customer opinions shared on review platforms and social media. These ratings influence the restaurant’s reputation and can affect future business.

How to measure online ratings and reviews

To measure this metric, regularly monitor review platforms and social media for customer feedback. Tools and software can also help aggregate and analyze this data.

Final words on restaurant KPIs and tracking restaurant metrics

Mastering the key performance indicators for restaurants is crucial for staying competitive and profitable. By tracking and analyzing these metrics, restaurant owners and managers can optimize their operations, improve customer satisfaction, and drive overall business success. Understanding and continuously monitoring these KPIs provides actionable insights to make informed decisions, ensuring the restaurant not only meets but exceeds its goals.

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