Restaurant Metrics

17 Key Restaurant Metrics You Should Understand To Scale Your Operations in 2023

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Making a restaurant successful comes boils down to how well you are tracking and adjusting your performance,

 

In fact,

Running a restaurant without tracking Key performance indicators is making your life much harder,

And is limiting your growth potential,

For this reason,

In this article, I will share with you 17 restaurant metrics that you need to track to make your restaurant more successful,

We separated those metrics into 4 segments:

  1. Sales
  2. Costs
  3. Marketing
  4. Operational

 

Let’s dive into each one of those metrics and see why they are detrimental to your restaurant,

 

 

Restaurant Sales Metrics

 

The tracking process of the sales metrics will give you crucial insights when it comes to your restaurant profitability,

And in these categories,

There are 7 key metrics that you want to track frequently:

  1. Break-even point
  2. Profit Margin
  3. NPAT
  4. Gross Profit
  5. Sales Per Head
  6. Sales per footage
  7. Sales per table

 

Let’s dive into each one of them,

 

A. Break-even point

The BEP Is a key indicator for any business,

It shows you the level of sale at which your business is neither generating profit nor incurring a loss,

In other words,

It is where your revenue equals your costs,

And from this point on,

Your scaling journey begins,

Formula:

 

Fixed Costs / Contribution Margin per unit

 

If you want to dive deeper into break-even analysis,

We have an article with a downloadable spreadsheet that covers that topic.

 

B. Profit Margin

Profit margin is expressed in percentages and it shows you the degree to which your restaurant is able to generate profit,

It gives you an idea of the current position of your business by essentially making year to year comparison,

Formula:

 

Profit/Total Revenue * 100

 

C. NPAT

The Net Profit After Tax is the amount of money that you have left after subtracting all costs, including taxes,

This is great to see what is your bottom line,

A good benchmark would be a 12% to 14% Net Profit Margin,

Under that would be considered not very profitable.

Formula:

 

Revenue – Operational Costs – Fixed Costs – Taxes

 

D. Gross Profit

The gross profit gives you the amount of money generated after subtracting only the operational costs,

The higher your gross profit means the lower your variable costs in terms of food and & beverage,

As this metric doesn’t include fixed costs,

A good number would be anything above 67%.

Formula:

 

Total revenue – COGS (Operational expenses)

 

E. Sales per head

Sales per head is a way for restaurant managers to determine to which degree the business relies on the employees,

The higher, the better,

And we simply obtain it by dividing the revenue generated in a year by the number of employees,

Formula:

 

Annual sales / Employee count

 

F. Sales per square foot

Sales per square foot are similar in a way to sales per head,

But in this case,

It refers to the amount of revenue you are generating per square foot in your restaurant,

You simply obtain it by following the same structure as the sales per head,

Formula:

 

Annual Sales / Total footage

 

G. Sale per table

Another metric that follows the same structure would be the sale per table one,

As the name mentions,

It refers to the number of sales you are generating per table in your restaurant,

It gives great insights on whether you are using your tables effectively or not,

Formula:

 

Annual Sales / Number of tables

 

Restaurant Sales Metrics

Restaurant Costs Metrics

 

Tracking your restaurant sales is crucial to determining the profitability of your business,

Yet,

The biggest challenge that most restaurateurs have is actually controlling costs,

And in this section we will cover 4 Costs Metrics that you can have control over if you track them:

  1. COGS
  2. Overhead
  3. Labor Costs
  4. Prime Costs

 

Let’s dive into each one of those costs,

 

A. COGS

The Cost Of Good Sold refers to the expenses that occur with the production of a good or service,

In the case of a restaurant,

COGS will refer to the food & beverage costs,

And determining what is the raw costs of each item on your menu is your first step in understanding where your costs stand,

As a general rule of thumb,

You don’t want:

  • Food costs over 30%
  • Beverage costs over 25%
  • Food and Beverage Costs over 33%

 

There are many ways you can determine if your costs are too high:

  • Cost Plus pricing
  • Annual sales report
  • Menu Engineering

 

And here are some ideas you can use to reduce your raw costs:

  • Switch ingredients
  • Use local Ingredients
  • Use seasonal Ingredients
  • Work with better suppliers
  • Implement Portion control
  • Eliminate some dishes

 

B. Overhead Costs

The Overhead costs include all of the costs that are not tied to a particular profit center such as food and beverage,

These costs include:

  • Accounting fees
  • Insurance
  • Utilities
  • Legal fees
  • Interests

 

And controlling those costs is more complicated as sometimes you don’t have full control over them,

Yet,

As a general rule of thumb,

Your overhead costs should not exceed 20% of your total revenue.

 

C. Labor Costs

Labor costs refer to the costs associated with your employee’s wages and benefits,

These costs can be high if you do not monitor them frequently,

Labor costs should ideally not exceed 22% of your total revenue,

Yet,

If your employee wages are too low,

You could end up losing customers as the internal quality of service could decrease,

 

D. Prime Costs

Prime costs refer to all direct costs and labor costs,

In other words,

It is just a costs grouping of both the labor and the overhead costs,

And it gives you great insights into the production efficiency of your restaurant,

It also gives you a great base for your pricing strategy.

 

Restaurant Costs Metrics

 

 

Restaurant Marketing Metrics

 

Tracking your marketing KPI is without a doubt one of the most important things to focus on,

The reason is that will proper tracking,

You will be able to determine how far you are from achieving the three basic goals:

  • Increased customer acquisition
  • Increased customer retention
  • Increase customer loyalty

 

And in order to determine your position in each one of those fields,

You will need to track a good number of metrics,

In this section, we will cover 3 metrics that are key to understanding and monitoring:

  1. Repeating customer rate
  2. Website Traffic
  3. Social following

Let us dive into each one of those restaurant metrics:

 

A. Repeating customer rate

The repeating customer rate is a perfect restaurant metric to track your customer retention and loyalty,

It simply measures to which degree customers come back to your restaurant,

And obviously the higher, the better it is for your retention and loyalty,

Those customers are also the ones that are the most likely to promote your restaurant themselves by:

  • Giving great reviews
  • Increasing your occupancy
  • Spreading the words about your restaurant,

 

But how to track it?

You simply divide the number of return customers by the total number of customers,

That info can be found in your Customer Relationship Management platform

Formula:

Return customer / Total customer * 100

 

B. Website Traffic

Analyzing your website traffic by using google analytics or a search console is key when it comes to your online presence,

In fact,

It gives you a tremendous amount of valuable information in order to:

  • Personalize your offer
  • Determine your segmentation
  • Increase your acquisition

 

By analyzing your website traffic over time you will be able to determine the behavior of people visiting your website,

Thus making it easier for you to understand your customers and connect with them.

 

C. Social Following

Social Following simply refers to the monitoring of your customers’ activity on social media,

You can track this by using:

  • Number of likes
  • Number of shares
  • Number of comments
  • Number of complaints

 

It is also a way to have a better relationship with your customer in order to increase retention and loyalty

 

Restaurant Marketing Metrics

 

 

Restaurant Operational Metrics

 

The last Metrics that we will cover in this article will be the operational metrics,

There are 3 crucial metrics that you should understand in order to determine your restaurant’s operational position:

  1. Operating leverage
  2. Employee turnover
  3. Inventory Turnover

 

Let’s briefly tackle each one of those

 

A. Operating Leverage

Calculating the operating leverage can be a bit confusing,

That’s why we have an article covering that with a spreadsheet that you can download,

But for the moment,

You just need to understand that operating leverage is a ratio that shows at which level is a restaurant leveraged,

In relation to its variable and fixed costs,

A Restaurant with high variable costs will have lower operating leverage

On the Other hand,

A restaurant with high fixed costs will be highly leveraged,

A good OL ratio would be somewhere around 1.2

 

B. Employee Turnover

Employee turnover is a metric that refers to the number of employees leaving your restaurant in a specific period,

You have to be careful with this as you will not be able to build a real team with a high turnover rate,

Plus,

A high turnover rate could also mean that you are not treating your employee the correct way,

Making them want to leave,

Formula:

 

(Employee who left / ((Starting employee + Ending employee) /2) ) * 100

 

 

C. Inventory turnover

Inventory turnover is a crucial restaurant metric to track,

The reason is that it shows how many times your restaurant sold and replaced your stock during a specific period,

If the inventory turnover ratio is higher,

It means that your restaurant is selling and replacing the inventory faster,

Which is a good thing,

Formula:

 

Net sales / Average inventory

 

Restaurant Operational Metrics

 

Conclusion

 

I hope you have enjoyed this article about the restaurant metrics that are crucial for your business,

Tracking those metrics will allow you to scale faster and in a more efficient way,

Obviously, there are many more out there that you can monitor and adjust,

But we found out that those ones were the most important ones to know from a starting point of view,

What’s next?

Now that you have the knowledge of how to evaluate the operational side of a restaurant,

You can learn about how to perform 5 different operation checklists to run your restaurant in a consistent way,

That being said,

Another starting point would be to learn everything about restaurant management,

Stay safe and see you soon!

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