The restaurant industry is constantly changing. Therefore, restaurant managers need to track their business consistently and gain visibility into how their restaurant is performing is to collect and measure both staff and financial performance. The best way to do so is to have specific key performance indicators KPIs and metrics so that restaurant managers can quickly point out any problems in the way their restaurant operates and act accordingly, or spend time on taking care of the areas in which they are doing well.
Read on to know more about the most important key performance indicators and metrics every restaurant manager should measure.
What are KPIs and why are they important?
A KPI is a performance measurement used to assess how effective your company is in achieving its key business objectives. They are measurable data points to help show that your restaurant is on track to achieve its goals.
KPIs aid you to measure, evaluate and adjust your restaurant’s operations to ensure continued success. Moreover, KPIs will also help you identify if you are spending a lot of time and money on practice that is not worth it and prioritize your practices accordingly.
There are many different KPIs and metrics according to the business type. However, you should choose the right ones that are relevant to your objectives.
KPIs and metrics must be:
- Applicable to the line of your restaurant business.
- Generated and measured with actual data through data-based channels. (POS)
- Identified Properly
- Communicated clearly throughout the staff.
- Tracked Regularly
- Relevant to achieving the goals.
The most important KPIs and metrics for your restaurant:
Kitchen management KPIs and Metrics:
To operate a successful kitchen, you have to find a balance between providing great value to the customers, while cutting your costs. Accordingly, consider optimizing your menu and reducing waste to keep down food costs.
Here are some of the KPIs to keep an eye on:
1. Cost of goods sold:
The cost of goods sold (or COGS) is probably the largest expense for any restaurant. Calculating COGS helps you measure the amount of money that goes into purchasing supplies and good ingredients for your menu items. You need to know your cost of goods sold to identify where you can reduce the costs in order to increase profitability.
Here is the formula to calculate COGS:
COGS = beginning inventory + purchases during the period – ending inventory
2. Menu item profitability and popularity:
Knowing your menu items profitability enables you to set a strong pricing strategy and help drive menu engineering and promotion decisions.
3. Production time per dish:
Knowing the production time of each dish can help you determine the value of every single dish according to turnaround time and expectations. Let the production time of each dish lead your decision to keep or delete that dish. Look for ways to shorten the production time of the popular dishes in order to offer faster service, provide better customer experience, and enhance your kitchen’s efficacy. On the other hand, if an item is rarely ordered and takes a short time to produce, consider deleting it to give the kitchen more time to prepare the items customers want, faster.
4. Food wasted per food purchased:
Food waste is a major concern for restaurants around the world. You need to Monitor your wasted food so that you can improve your demand forecasts, reconsider how and where to buy food, and better manage your food stocks and storage. It can also help you determine if there are better practices to prepare food and if you need to adjust the portion sizes or serving methods.
5. Spend-per head:
This metric tells you how much customers spend on your restaurant on average.
To find how much you spend per head, you can use the following formula:
Spend-per head = total revenue / number of customers
6. Other kitchen management KPIs to consider tracking are:
- Kitchen linens costs
- Value of stock
- Total food costs
- Best/worst selling items
Employees and profitability KPIs:
Your employees are a major factor to drive your restaurant towards success. Thus, you need to figure out how productive your staff is and how much sales they bring in. in addition, you shall make sure that your employees are engaged and happy at work. After all, you should look for ways to retain your employees and decrease their turnover to enhance productivity and the bottom line.
Here are some of the KPIs in this area:
1. Food and beverage sales per customer:
You should identify which menu items appeal most to customers, and figure out if time or day affect total spend. Tracking this metric will allow you to adjust in the menu. You may delete poorly performing dishes that decrease kitchen productivity and generates minimal profit. Alternatively, you can increase prices on popular and hot selling dishes to improve your margins.
2. RevPASH: (Revenue per available seat per hour):
Revenue per available seat hour (usually referred to as RevPASH) is used to optimize labor scheduling, plan food purchasing, and to improve table turn times. You can apply this metric to calculate how effectively each seat in your restaurant is generating revenue do that you can make adjustments to improve hour-by-hour profitability. “RevPASH is a good measurement because it uses time and capacity in addition to average check to paint a bigger picture than just margins or average checks do on their own,” says Ryan Croson at Vanee.
This is how to calculate RevPASH:
RevPash = Total revenue / (available seats x opening hours)
3. Total labor cost percentage:
It is not enough to know your staff’s hourly or annual rates. Nevertheless, you have to determine all labor expenses an employee incurs, including sick and vacation time, staff discounts, benefits, and insurance, as well as taxes and other local wage-related laws. Labor Cost Percentage indicates how much you spend on labor as a percentage of revenue. It enables you to determine your costs and sales so you can manage your restaurant’s outgoings more effectively.
Here is an easy formula for labor cost percentage:
Labor cost percentage = amount spent / total sales * 100
4. Employee turnover rate:
This indicates the percentage of employees leaving your restaurant during a certain period. When you consider the expenses associated with finding, hiring, and training new employees, staff turnover above average can be an enormous problem for your restaurant.
Here is the formula to calculate your employee turnover rate:
Employee turnover = number of employees who left during a specific period / average number of employees * 100