It is essential to measure restaurant KPIs (key performance indicators) to ascertain if your day-to-day operations is in line with your business objectives. Knowing what metrics to observe can help in pinpointing the critical KPIs for a specific restaurant.
This article will highlight why it is crucial for managers to evaluate restaurant KPIs and provide a few that can be tracked.
What is the significance of Key Performance Indicators (KPIs) in restaurants?
Gaining insight into the functioning of a restaurant can be done by collecting and assessing both financial and team performance metrics with the help of key performance indicators (KPIs). By using KPIs, managers can easily detect any issues with their restaurant’s operations and take the appropriate steps or focus on developing the areas that are doing well.
In the restaurant business, staying afloat is a real challenge. With tiny profits and ever-changing customer preferences, it can be hard to stay competitive. Moreover, even when being present in the restaurant, owners find it hard to monitor operations and staff.
To what extent do KPIs provide an indicator of performance?
Key Performance Indicators (or Leading Indicators), are useful in demonstrating that your restaurant is heading in the right direction towards achieving its goals. Through KPIs, you are able to see if you are dedicating too much energy and funds to something that isn’t worthwhile, and prioritize accordingly.
The number of restaurant KPIs is extensive, yet not all of them may be applicable to your business. It’s essential that you decide which KPIs are most important in achieving your goals – devoting attention to the wrong ones could be damaging to your eatery.
In order to save you time, we have compiled a selection of key performance indicators which we consider to be of particular relevance to restaurant managers.
Crucial Performance Indicators that Restaurants Should Consider
Restaurant managers have a lot of metrics to consider when organizing their restaurants. In order to simplify this process, we have sorted these metrics into three categories: sales and profitability, customer experience, and marketing.
It is not necessary to keep up with, or comprehend, all the data right at this moment. View this resource as a practical and convenient reference.
Sales and Profitability Metrics
The effectiveness of any restaurant is dependent on its personnel, both the leadership and the employees. As labor costs are usually one of the greatest expenses for any business, it’s important to be aware of how productive the staff are and how much revenue they are able to generate.
It’s critical to make sure that your employees are happy, as high staff turnover can affect profitability and efficiency.
1. Cashflow
A lot of work is necessary to open and maintain a successful restaurant – enthusiasm for cooking, dedication, and the right people, but without one essential item, all the preparation would be for nothing. That essential item is money.
Restaurants need to be mindful of their cash flow, both incoming and outgoing, so as not to put their business in jeopardy. Without keeping an eye on the cash on hand, a restaurant may be doomed to failure.
This is the equation for determining cash flow:
The amount of cash on hand can be determined by subtracting the amount of cash at the end of a certain period from the amount of cash at the beginning of that period.
2. Cost of Goods Sold
It is necessary to calculate the cost of goods sold (COGS) in order to determine how much money is spent on procuring supplies and ingredients for the menu items. Before one can ascertain their restaurant’s profits, the COGS must be calculated.
This is a guide for figuring out your COGS:
The calculation of the cost of goods sold is determined by taking the beginning inventory, adding any purchases made during the period, then subtracting the ending inventory.
3. Percentage of Labor Cost
This KPI is essential for restaurants. It helps to compare expenses to sales, so you can better control what goes out of your business. Calculating costs accurately can help identify any potential issues, allowing you to make the necessary changes in advance.
A simple formula for working out the cost of labor is as follows:
The labor cost percentage is determined by dividing the amount spent on labor by the total sales and then multiplying the result by 100.
4. Income per Available Seat/Hour
Dr. Sheryl Kimes at Cornell University developed RevPASH (revenue per available seat hour), which is perceived to be a great indicator of accomplishment in the restaurant sector. This metric takes into account the time factor when determining how much revenue each seat yields in a day/hour.
This is the procedure for figuring out RevPASH:
The formula for RevPASH is total sales divided by the number of seats accessible multiplied by the hours open.
5. Rate of Table Turnover
Your restaurant’s bottom line can really suffer if the table turnover rate is low, so it’s essential to keep a close eye on this metric. The timing of the turnover ought to be just right to give customers a great dining experience, without having new patrons waiting for a seat.
Figuring out your table turnover rate is a simple process:
The rate of table turnover can be determined by dividing the amount of time elapsed by the number of tables served during that interval.
6. The Average Number of People per Table
This can be determined by looking at the occupancy rate. This is an important factor to consider when deciding how many people can be seated in a certain area.
The average number of customers visiting the restaurant over a given time is captured by this measure.
It can be determined by taking the following steps:
The average proportion of tables occupied can be determined by dividing the number of occupied tables by the total number of tables that are available.
7. Expenditure per Person
This measurement will inform you how much the customers in your store shell out on average. To determine the expenditure per individual, you can employ this straightforward formula:
The amount spent by each customer can be calculated by dividing total revenue by the number of customers.
8. Staff Turnover
Employee turnover is an issue that many businesses have to deal with. This is a process that can be costly in terms of time and money, so it is wise to make sure that the right choices are made when it comes to hiring new personnel.
When you consider the financial costs of recruiting and preparing new personnel, having an employee turnover rate that is higher than the average can be an expensive issue for your restaurant.
This is the equation for determining staff turnover rate:
The rate of staff turnover is calculated by taking the amount of personnel who have departed during a specific time frame divided by the average number of employees and multiplying it by one hundred.
Customer Experience Metrics
Have you ever gone to a restaurant without hearing or reading about it first? Probably not!
The majority of shoppers, a full 97%, peruse online reviews prior to making a purchase and nearly half will only trust 4-star reviews or more. Therefore, customer satisfaction needs to be a priority for any restaurant manager, regardless of whether they manage a high-end restaurant or a small neighborhood cafe. As customers have the power to influence a business with their money, it is necessary for the staff to be friendly and efficient in order to keep them returning.
1. Consumer Feedback on the Internet
Online reviews are a form of consumer feedback that can be found on the internet.
It is necessary to keep a record of the quantity of online reviews and the average ratings given on Google My Business, Facebook, Tripadvisor and Yelp.
2. Client Retention Rate
The rate at which customers are retained is a key metric to measure a business’s success.
The customer retention rate of your restaurant is the proportion of customers who remain loyal to your establishment in comparison to the amount of customers you began with within a specific timeframe.
To figure out the answer, you should do the following:
The customer retention rate can be calculated by subtracting the number of new customers acquired during a period from the number of customers at the end of that period, then dividing that result by the number of customers at the start of the period and multiplying it by 100.
Considering the effort and cost involved in gaining new patrons, this KPI is very important. To keep your restaurant expanding, you have to make up for each consumer you lose, in addition to attracting fresh customers. Additionally, your consumer retention rate helps you in gauging the commitment of your current consumers and, in turn, how good your customer service is.
Marketing Metrics
Marketing KPIs are used to measure the effectiveness of a company’s advertising efforts. KPIs can be used to assess the success of particular campaigns, as well as to monitor changes in consumer behavior and sales trends. By tracking these metrics, companies can adjust their strategies in order to maximize their return on investment.
Nowadays, a business’s success can be greatly hindered by an inferior website and substandard social media accounts, so it is crucial to keep a close eye on these marketing outlets and have a plan that incorporates them into all of your advertising efforts.
Customers may have difficulty discovering essential information such as opening times, location, and menus; if so, they are likely to abandon your website or social media profile, and search for an alternate option. So make sure as possible for customers to get the information they need.
Restaurant managers should pay attention to the following key performance indicators in the realm of marketing:
1. Metrics Related To Social Engagement
Investment of time and money into social media can be substantial; therefore, it is essential to determine if it is worth the cost. The following metrics can be used to measure the level of engagement between a restaurant’s social media account and its current and potential customers:
- Likes: The number of clicks made on the “Like” buttons of your post.
- Comments: The number of comments on your posts.
- Shares: The frequency at which a post has been shared on Facebook, retweeted on Twitter or repinned on Pinterest.
- Engagement rate: This assesses the level of communication between your social media account and followers.
The way in which social media has changed the way we communicate is an undeniable fact. There is no doubt that it has had a major impact on how we communicate with one another, both in terms of the breadth of topics we can discuss and the speed of dialogue. What was once a slow process of exchanging ideas can now be done in a matter of seconds. Furthermore, it has enabled us to connect with people from around the world in a way that was not previously possible.
The integration of technology into our routine has become ubiquitous; it is now difficult to find someone who is not reliant on modern gadgets, at least to some extent.
Figuring out the success of your social media strategies can be done quickly by monitoring metrics. A tool like Hootsuite is capable of rapidly collecting the necessary data.
2. Evaluation of Website Traffic
Your website should be your top priority in terms of marketing and continuously work to bring in new customers to your restaurant. Monitoring the key performance indicators (KPIs) in your Google Analytics data is an easy way to measure the success of your website.
- Analyzing channels: An effective way to assess your website’s performance is to analyze the referral source of your visitors. Examining the number of people coming to your site via organic search, referral, social media, or paid search can give you an understanding of which sources are driving the most traffic.
- Engagement rates: Bounce rate (the proportion of people who only view one page and then leave) is another significant metric. If getting users to interact with the content on your site is a priority, you should also consider monitoring the average number of pages viewed per session.
- Search engine rankings and : By keeping track of your keyword rankings and search engine traffic, you can determine if your restaurant is likely to be seen by the proper people.
- Conversions: With the help of call tracking software and Google Analytics, you can track important conversions for your restaurant, such as phone bookings.
Once you’ve obtained data concerning your KPIs, it is essential to meticulously analyze the data in order to comprehend why your restaurant is producing these outcomes, whether they are good or bad.
You can utilize the data to figure out which areas need to be improved and create a plan of action. It is essential to have KPIs in place, however, they should be related to the broader ambitions of the restaurant.
This article was published by LevelUp Recruiting LLC.
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