Today’s restaurants are under more pressure than ever to deliver a positive and memorable customer experience through consistent, high-quality service. But with so many factors to consider, how can restaurateurs ensure they’re hitting the mark? One key metric to track is your restaurant KPIs – or key performance indicators.
By monitoring these metrics closely, you can identify areas where your restaurant could improve and make the necessary changes to stay ahead of the competition.
So what are some important fast food KPIs to keep an eye on? Read on to find out!
What Is KPI In Restaurant?
A restaurant KPI is a performance metric used to measure the success of a restaurant business. Multiple types of KPIs are available, but the commonly used ones include sales, profitability, customer satisfaction, and employee productivity metrics. While some KPIs are more important than others, all can provide valuable insights into the overall health of a restaurant business.
Sales are the lifeblood of any restaurant business, so it’s no surprise that they are one of the most important KPIs to track. Some sales-related KPIs that restaurants should keep an eye on include total revenue, average check size, and customer count. By tracking these metrics, restaurant owners can get a good idea of how their business is performing and make necessary changes to increase restaurant sales.
In addition to sales, profitability is another key metric that all restaurants should track. There are various profitability KPIs that one can use, though some of the widely used ones are gross margin, net profit margin, and operating margin. By tracking these metrics, restaurant owners can get a good idea of how profitable their business is and make necessary changes to improve profitability.
Customer Satisfaction KPIs
Customer satisfaction is another important KPI for restaurants to track. Several customer satisfaction KPIs can be used, but some of the most common include repeat business, customer complaints, and customer surveys. By tracking these metrics, restaurant owners can get a good idea of how satisfied their customers are and make necessary changes to improve satisfaction levels.
Employee Productivity KPIs
Employee productivity is another important metric for restaurants to track. Several different employee productivity KPIs can be used, but some of the most common include employee turnover, absenteeism, and productivity per hour. By tracking these metrics, restaurant owners can get a good idea of how productive their employees are and make necessary changes to improve productivity.
While restaurants can track many different KPIs, these are some of the most important. By tracking these KPIs regularly, restaurant managers and owners can get a good idea of how their business is performing and make necessary changes to improve performance.
Restaurant KPIs You Must Track
No business can succeed without proper tracking of key performance indicators KPIs. Below are 17 important restaurant KPIs that you must track within your restaurant data analytics reports to ensure success:
1. Cost of Goods Sold
(Beginning inventory + Purchases in Period) – Ending Inventory = Cost of Goods Sold
Your company starts the period with an inventory worth $100,000, it buys goods worth $50,000 during the period, and has an ending inventory worth $25,000.
The cost of goods sold would be..
COGS = (Beginning Inventory + Purchases) - Ending Inventory
COGS = ($100,000 + $50,000) - $25,000
= $150,000 - $25,000
This is important to know as it provides insight into your company's inventory expenses and enables you to make informed decisions pertaining to future purchases.
2. Spend per Head
The spend-per-head formula is a simple way to calculate how much revenue each customer brings in. To use the formula, divide total revenue by the number of customers. This will give you an average amount that each customer spends.
Total revenue / Number of Customers = Spend Per Head
For example, let’s say your business had $100,000 in total revenue last year and 1,000 customers. This would mean that your spending per head would be $100. On average, each customer spent $100 at your business last year.
$100,000 / 1,000 = $100
This information can be helpful in various ways. For example, it can help you set prices for new products or services. It can also help you determine how much to spend on restaurant marketing and advertising, as you’ll want to target the customer profile that spends the most on your business.
3. Employee Turnover Rate
The employee turnover rate is a ratio that shows the number of employees who quit in a given period divided by the number of employees working. This ratio can be used to measure the health of a company and its ability to retain employees.
If you want to find out the employee turnover rate, divide the number of employees who left during a certain period (such as a month) by the number of employees currently employed.
Number of Employees Who Quit / Number of Employees Working = Turnover Rate
For example, if ten employees leave in a month and 100 are working, the employee turnover rate would be 10%.
The employee turnover rate is just one metric that can be used to measure the health of a company. A high employee turnover rate can be costly for a company, resulting in a loss of productivity and knowledge. It can also be an indicator of poor management or working conditions. On the other hand, a low employee turnover rate can indicate a happy and stable workforce.
4. Break Even Point
Once you know your fixed and variable costs, you can calculate your break-even point. This is the point at which your business covers all of its costs and begins to make a profit.
To calculate your break-even point, divide your total fixed costs by your total sales minus your total variable costs.
Break-Even = Fixed Costs / (Total Sales – Variable Costs / Total Sales)
To provide an instance: if your business has $10,000 in fixed costs, $6,000 in variable costs, and you charge $100 per product, the break-even point would be reached after selling 20 units.
That means you need to sell 20 units to cover your costs and start making a profit.
Keep in mind that your break-even point will change as your costs change. So monitoring your costs and recalculating your break-even point is important.
Once you know your break-even point, you can start working on strategies to increase sales and reduce costs to reach profitability.
5. Gross Profit
Gross profit is the difference between total revenue and the cost of goods sold. It’s a measure of a company’s efficiency and profitability. Gross profit margins vary by industry, but generally, a higher gross profit margin is better than a lower one.
To calculate gross profit, subtract the cost of goods sold from total revenue.
Total Revenue – Cost of Goods Sold = Gross Profit
For example, if a company has total revenue of $100,000 and the cost of goods sold is $80,000, then the gross profit would be $20,000.
Gross profit margins are calculated by dividing gross profit by total revenue. So in our example above, the gross profit margin would be 20% ($20,000/$100,000).
6. Historical Sales
Historical sales can give you a good idea of your restaurant’s performance. It helps you identify trends and see where your business is improving or declining. Tracking historical sales data also helps you make projections for future sales.
There are a few different ways to track historical sales data. You can use restaurant accounting software to track sales by month, quarter, or year. You can also create a spreadsheet to track sales over time. Whichever method you use, update your records regularly so that you have accurate data to work with.
7. Cash Flow
In business, cash flow refers to the inflow and outflow of cash. It represents the amount of money generated or utilized during a specific period.
A positive cash flow implies that the business is receiving more money than it is spending, which is considered favorable. Negative cash flow means the business has more money going out than coming in, which can quickly lead to financial trouble.
Knowing your business’s cash flow is important to make sound financial decisions. The cash flow formula is simple:
Cash Flow = Cash Input – Cash Output
To calculate your business’s cash flow, start by adding up all the money coming into the business. This includes money from sales, investments, and loans.
Then, subtract any money that is going out of the business. This includes restaurant expenses like rent, payroll, and inventory costs. The resulting number is your business’s cash flow.
8. Prime Cost
The prime cost of a product is the sum of the labor costs and the cost of goods sold (COGS). This metric is used to assess a product’s or manufacturing process’s profitability.
Prime cost = Labor Cost + COGS
9. Prime Cost Ratio
The prime cost ratio is a key indicator of a company’s profitability and efficiency. It is calculated by dividing a company’s prime cost (cost of goods sold + direct labor expenses) by its total sales. When a company has a high ratio, it signals that there is an overspending on production costs. On the other hand, a low ratio suggests a lack of efficiency in utilizing available resources.
Prime Cost as % of Sales Ratio = Prime Cost / Total Sales
A prime cost ratio is an important tool for management to assess a company’s financial health and identify areas where improvements can be made. It can also be used to compare a company’s performance to its competitors.
10. Labor Cost Ratio
When evaluating a company’s financial performance, one important metric to look at is the labor cost ratio. This ratio measures the percentage of sales attributable to control labor costs.
A high labor cost ratio indicates that a company highly depends on labor costs for its revenue. This can be a problem if labor costs start to eat into profits. Conversely, a low labor cost ratio means that labor costs are a small part of the company’s overall expenses, which can be an advantage in terms of profitability.
To calculate the labor cost ratio, divide labor costs by sales.
Labor Cost ratio = Labor Costs / Sales
For example, if a company has $100,000 in sales and $20,000 in labor costs, its labor cost ratio would be 20%.
$20,000 / $100,000 = 20%
The labor cost ratio is helpful for companies to track over time.
If the labor cost ratio increases, it may imply that the company is becoming less effective and increasingly dependent on labor. When the labor cost ratio decreases, it could indicate that the company is becoming more effective and less dependent on manpower.
11. Table Turnover Rate
Table turnover rate is an important restaurant metric because it directly impacts revenue. Faster table turnover rates mean that you can cater to a larger number of guests, resulting in increased earnings for your enterprise.
To calculate your table turnover rate, divide the period of time by the number of tables served during that time period.
Table Turnover Rate = Period of Time / Number of Tables Served During that Time Period
There are a few ways to increase your table turnover rate. One is to optimize your restaurant seating layout so that restaurant servers can move around quickly and efficiently. Another is to train your staff on strategies for turning tables quickly, such as upselling techniques and suggestive selling.
12. Average Table Occupancy
The average table occupancy rate is a good indicator of a restaurant’s popularity and performance. A higher average table occupancy rate means that more people are coming to the restaurant and that it is doing better. A lower average table occupancy rate means fewer people are coming to the restaurant, which is not doing well.
By dividing the number of occupied tables by the total number of tables, you can determine the average table occupancy rate.
Number of Occupied Tables / Total Number of Tables = Average Table Occupancy
For example, if there are ten occupied tables and 20 total tables, the average table occupancy rate would be 50%.
10 / 20 = 0.5 or 50%
Table occupancy rates vary from one restaurant to another. Some restaurants may have very high rates, while others may have meager rates.
13. Per-Person Average (PPA)
A server’s per-person average (PPA) measures their sales divided by the total number of guests served. This metric is a helpful way to compare servers’ performance, as it considers the number of deals and the number of guests served.
A higher PPA indicates that a server sells more items per guest and is more efficient. Additionally, this metric can be used to identify potential areas for improvement; for example, if a server has a low PPA, they may need to focus on upselling or cross-selling items to guests.
To calculate a server’s PPA, divide their total sales by the total number of guests served. This metric can be tracked to see how a server’s sales skills are improving (or declining). Additionally, it can be used to compare servers against each other.
Per person average = total server sales / total number of guests served by server
For example, if Server A has a PPA of $20 and Server B has a PPA of $30, Server B sells more items per guest than Server A.
By tracking this metric over time, you can better understand your servers’ sales skills and identify potential areas for improvement.
14. Number Of Guests Served, Per-Server, Per-Hour
This metric can be determined by dividing the total number of guests served by the number of service hours worked, assuming you have knowledge of both.
Number of Guests Served per Server per Hour = Total Number of Guests Served / Number of Service Hours Worked
This metric is important because it helps identify how well a restaurant is staffed.
A low number of guests served per server per hour may suggest that the restaurant is understaffed and needs more servers..
15. Server Errors Per-Guest
Server errors per guest can be a useful metric to track when identifying potential issues with your website or server.
Here’s the formula:
Server Errors per Guest = Total Number of Server Errors / Total Number of Items Wrung In
By tracking this metric, you can readily observe if there is a growing trend of errors, which may signify an underlying problem that needs to be addressed.
Additionally, by monitoring server errors per guest, you can get an idea of how well your website or server performs.
If the number of errors is consistently low, your website or server is likely running smoothly. However, increasing errors could indicate something is wrong and needs fixing.
16. Food Wasted
A company’s food waste percentage is determined by the amount of uneaten food in relation to the total food purchased. Companies can take active steps toward reducing their waste production by measuring inventory control.
Here’s the formula:
Weight of Wasted Food / Total Food Purchased = Percent of Food Wasted
Reducing food waste in restaurants can have a positive impact on a company’s bottom line, as well as on the environment. This calculation can help businesses determine how much improvement is needed in their food waste reduction efforts. In addition, by understanding where and why food is wasted throughout the supply chain, companies can put targeted solutions in place to reduce restaurant food costs.
Revenue per available seat is an indicator of how much money a company can make per available seat. This metric is often used in the airline industry to compare different airlines’ performance based on the revenue they generate per available seat hour.
To calculate revenue per available seat, divide a company’s total revenue by the number of available seats multiplied by the number of hours those seats are open. This will give you the average amount of revenue that each seat generates.
RevPash = Total Revenue / (Available Seats x Opening Hours)
For example, if you’re looking at an airline, you would want to compare the different carriers’ RevPash figures to see which is performing better. A higher RevPash figure indicates that an airline generates more revenue per seat and is more efficient.
Restaurant KPI Dashboard
This dashboard helps restaurant owners and managers track and improve key performance indicators (KPIs), such as inventory variance, historical sales, cost of goods sold (COGS), and profitability.
Book a demo today and see how it can help you improve your restaurant’s performance.
Frequently Asked Questions About Restaurant KPI
Are you curious about the key performance indicators (KPIs) that successful restaurants in the restaurant industry track? Look no further! Here are some frequently asked questions about restaurant KPIs.
What Is SMART KPI?
A SMART KPI is an acronym for specific, measurable, attainable, relevant, and time-bound key performance indicators. Let’s break that down a bit further:
- Specific: A SMART KPI should be clearly defined and easy to understand. It should target a specific area of your business that you want to improve.
- Measurable: A SMART KPI must be quantifiable so that you can track your progress over time. Otherwise, knowing if you’re making any progress will be challenging.
- Attainable: A SMART KPI should be challenging but achievable. If it’s too easy, you’re not pushing yourself enough. But if it’s too difficult, you’ll never reach it.
- Relevant: A SMART KPI should be relevant to your business goals. There’s no point in setting a KPI that doesn’t help you achieve your objectives.
- Time-Bound: A SMART KPI should have a deadline so that you can track your progress and make necessary adjustments along the way. Without a timeline, it’s easy to get sidetracked and lose sight of your goal.
Adopting a SMART KPI system is a great place to start if you want to improve your business.
What are KPIs In Hospitality?
Various KPIs can be used to measure the performance of a hospitality business. Some common KPIs include:
- Revenue per available room (RevPAR)
- Average daily rate (ADR)
- Occupancy rate
- Guest satisfaction score
- Employee satisfaction score
- Food and beverage cost percentage
Using the right KPIs is essential to understanding your hospitality business’s performance and where improvements can be made. Choose KPIs relevant to your business goals and objectives and track them regularly. Doing so will help ensure your business is on track to meet its goals.
Which KPI Is Most Important?
One KPI that is often considered to be very important is revenue concentration. This metric measures how much a company’s revenue comes from its top customers.
A high revenue concentration indicates that a small number of customers are responsible for a large portion of the company’s sales. Whether this is a positive or negative occurrence is determined by the particular circumstances.
How Do You Write Employee KPI?
When writing employee KPIs, there are four things to keep in mind.
- Each KPI should be specific and measurable.
- Each KPI should be aligned with the company’s overall strategy.
- Each KPI should have a clear time frame.
- Each KPI should be reviewed and updated regularly. This ensures that the KPIs remain relevant and accurate. It also allows for adjustments to be made if necessary.
What KPI Should I Use?
The answer to that question depends on your business goals.
Do you want to increase sales, reduce costs, or improve customer satisfaction? Once you know your goal, you can choose a KPI that will help you measure it.
Let's say your goal is to increase sales; you could track metrics like revenue, conversion rate, or average order value to monitor your progress.
If your goal is to reduce costs, you might track metrics like acquisition costs or operating expenses. And if your goal is to improve customer satisfaction, you might track customer satisfaction scores or retention rates.
No matter what your goal is, there’s a KPI that can help you measure it. So if you’re unsure which one to use, start by thinking about what you want to achieve. After considering various KPIs, you can narrow down your choices and select the one that provides the most valuable and actionable insights for your business.